International Economics
Part 4
Dr. Stefan Kooths
BiTS Berlin
(winter term 2013/2014)
www.kooths.de/bits-ie
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Outline
1.
2.
3.
4.
Introduction and Overview
Systemizing and Recording Cross-border Economic Activity
The Pure Theory of International Trade
Trade Policy: Free Trade vs. Protectionism
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Protectionism: Goals and instruments
Tariffs
Nontariff-barriers to trade
Export subsidies (dumping)
Economic integration and multilateral trade policy
Free trade: Pros and cons
5. Foreign Exchange Markets and the Open Macroeconomy
6. Case Study: The Euro Area Crisis
7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Goals of protectionism
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Mercantilism
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Tariffs vs. nontariff barriers to trade
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Outline
1.
2.
3.
4.
Introduction and Overview
Systemizing and Recording Cross-border Economic Activity
The Pure Theory of International Trade
Trade Policy: Free Trade vs. Protectionism






Protectionism: Goals and instruments
Tariffs
Nontariff-barriers to trade
Export subsidies (dumping)
Economic integration and multilateral trade policy
Free trade: Pros and cons
5. Foreign Exchange Markets and the Open Macroeconomy
6. Case Study: The Euro Area Crisis
7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Tariff as a tax on imports
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Types of custom duties
 Specific tariff
 Ad valorem tariff
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Effect on domestic producers
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Effect on domestic consumers
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Government revenues
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Net national effect
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Terms-of-trade effect: Small vs. large countries
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Nationally „optimal“ tariffs
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Outline
1.
2.
3.
4.
Introduction and Overview
Systemizing and Recording Cross-border Economic Activity
The Pure Theory of International Trade
Trade Policy: Free Trade vs. Protectionism






Protectionism: Goals and instruments
Tariffs
Nontariff-barriers to trade
Export subsidies (dumping)
Economic integration and multilateral trade policy
Free trade: Pros and cons
5. Foreign Exchange Markets and the Open Macroeconomy
6. Case Study: The Euro Area Crisis
7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Types of nontariff barriers
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Import quotas: Small country analysis
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Allocating import licenses
 Fixed favoritism
 Auction
 Resource-using procedures
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Import quotas: Large country analysis
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„Voluntary“ export restraints
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Other nontariff barriers
 Product standards
 Domestic content requirements
 Government procurement
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Outline
1.
2.
3.
4.
Introduction and Overview
Systemizing and Recording Cross-border Economic Activity
The Pure Theory of International Trade
Trade Policy: Free Trade vs. Protectionism






Protectionism: Goals and instruments
Tariffs
Nontariff-barriers to trade
Export subsidies (dumping)
Economic integration and multilateral trade policy
Free trade: Pros and cons
5. Foreign Exchange Markets and the Open Macroeconomy
6. Case Study: The Euro Area Crisis
7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Dumping vs. fair market value
 „Normal“ value
» Comparative (prices charged in domestic market)
» Cost-based (selling below average cost)
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Types of dumping
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Predatory
Cyclical
Seasonal
Persistent (price discrimination)
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Small exporting country analysis
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Large exporting country analysis
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Retaliation
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Strategic trade policy: Boing vs. Airbus (1/2)
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Strategic trade policy: Boeing vs. Airbus (2/2)
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Outline
1.
2.
3.
4.
Introduction and Overview
Systemizing and Recording Cross-border Economic Activity
The Pure Theory of International Trade
Trade Policy: Free Trade vs. Protectionism






Protectionism: Goals and instruments
Tariffs
Nontariff-barriers to trade
Export subsidies (dumping)
Economic integration and multilateral trade policy
Free trade: Pros and cons
5. Foreign Exchange Markets and the Open Macroeconomy
6. Case Study: The Euro Area Crisis
7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Stages of economic integration
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Regional economic integration
Source: http://en.wikipedia.org/wiki/File:Economic_integration_stages_(World).png
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Trade creation and trade diversion
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Other effects of economic integration
 Increase in competition (reducing monopoly power)
» Lower prices (static efficiency)
» Higher productivity/lower cost of production (dynamic efficiency)
 Lower cost by expanding scales of production
 More opportunities for business investments (FDI)
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Case study: The European Union
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Trade embargoes
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International trade disputes
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GATT and WTO
 GATT (1947)
» General Agreement on Tariffs and Trade
 WTO (1994)
» World Trade Organization
» www.wto.org
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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Outline
1.
2.
3.
4.
Introduction and Overview
Systemizing and Recording Cross-border Economic Activity
The Pure Theory of International Trade
Trade Policy: Free Trade vs. Protectionism






Protectionism: Goals and instruments
Tariffs
Nontariff-barriers to trade
Export subsidies (dumping)
Economic integration and multilateral trade policy
Free trade: Pros and cons
5. Foreign Exchange Markets and the Open Macroeconomy
6. Case Study: The Euro Area Crisis
7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4
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First best vs. second best
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Costs of protection
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Loss of welfare (deadweight losses)
Foreign retaliation
Enforcement costs
Renk-seeking costs
Rents to foreign producers (VERs)
Dynamic inefficiencies (loss of dynamic efficiency)
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Externalities
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Promoting domestic production or employment
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The infant industry/dying industry arguments
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Public revenues
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Noneconomic objectives
 „National pride“
 National defense
 Domestic income redistribution
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