international economics part 4
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International Economics Part 4. Dr. Stefan Kooths BiTS Berlin (winter term 2013/2014) www.kooths.de/bits-ie. Outline. Introduction and Overview Systemizing and Recording Cross-border Economic Activity The Pure Theory of International Trade Trade Policy: Free Trade vs. Protectionism - PowerPoint PPT PresentationTRANSCRIPT
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 1
International EconomicsPart 4
Dr. Stefan KoothsBiTS Berlin
(winter term 2013/2014)www.kooths.de/bits-ie
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 2
Outline
1. Introduction and Overview2. Systemizing and Recording Cross-border
Economic Activity3. The Pure Theory of International Trade4. 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 Crisis7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 3
Goals of protectionism
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 4
Mercantilism
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 5
Tariffs vs. nontariff barriers to trade
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 6
Outline
1. Introduction and Overview2. Systemizing and Recording Cross-border
Economic Activity3. The Pure Theory of International Trade4. 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 Crisis7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 7
Tariff as a tax on imports
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 8
Types of custom duties
Specific tariff Ad valorem tariff
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 9
Effect on domestic producers
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 10
Effect on domestic consumers
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 11
Government revenues
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 12
Net national effect
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 13
Terms-of-trade effect: Small vs. large countries
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 14
Nationally „optimal“ tariffs
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 15
Outline
1. Introduction and Overview2. Systemizing and Recording Cross-border
Economic Activity3. The Pure Theory of International Trade4. 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 Crisis7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 16
Types of nontariff barriers
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 17
Import quotas: Small country analysis
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 18
Allocating import licenses
Fixed favoritism Auction Resource-using procedures
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 19
Import quotas: Large country analysis
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 20
„Voluntary“ export restraints
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 21
Other nontariff barriers
Product standards Domestic content requirements Government procurement
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 22
Outline
1. Introduction and Overview2. Systemizing and Recording Cross-border
Economic Activity3. The Pure Theory of International Trade4. 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 Crisis7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 23
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 24
Types of dumping
Predatory Cyclical Seasonal Persistent (price discrimination)
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 25
Small exporting country analysis
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 26
Large exporting country analysis
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 27
Retaliation
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 28
Strategic trade policy: Boing vs. Airbus (1/2)
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 29
Strategic trade policy: Boeing vs. Airbus (2/2)
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 30
Outline
1. Introduction and Overview2. Systemizing and Recording Cross-border
Economic Activity3. The Pure Theory of International Trade4. 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 Crisis7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 31
Stages of economic integration
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 32
Regional economic integration
Source: http://en.wikipedia.org/wiki/File:Economic_integration_stages_(World).png
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 33
Trade creation and trade diversion
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 34
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)
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 35
Case study: The European Union
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 36
Trade embargoes
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 37
International trade disputes
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 38
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 39
Outline
1. Introduction and Overview2. Systemizing and Recording Cross-border
Economic Activity3. The Pure Theory of International Trade4. 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 Crisis7. Summary: The Key Lessons Learnt
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 40
First best vs. second best
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 41
Costs of protection
Loss of welfare (deadweight losses) Foreign retaliation Enforcement costs Renk-seeking costs Rents to foreign producers (VERs) Dynamic inefficiencies (loss of dynamic efficiency)
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 42
Externalities
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 43
Promoting domestic production or employment
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 44
The infant industry/dying industry arguments
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 45
Public revenues
KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 46
Noneconomic objectives
„National pride“ National defense Domestic income redistribution