trade & policy issues trade interventions & trade agreements framework for analyzing...
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Trade & Policy Issues
Trade Interventions & Trade Agreements
Framework for Analyzing International Trade
& Trade Policy Interventions
Trade Policy Interventions (Imports)Tariffs - absolute vs ad valorum, variable levy
March 2009 - Mexico to raise tariffs on 90 U.S. agr & industrial products, worth more than $2.4 B
Tariff on fresh grapes - 45%
Animal products 29.7Dairy products 218.5Fruit, vegetables, plants 3.5Coffee, tea 7.5Cereals & preparations 20.2Oilseeds, fats & oils 5.3Sugars and confectionery 6.5Beverages & tobacco 9.4Cotton 0.8Other agricultural products 7.5
Source: World Tariff Profiles, 2011. WTO Geneva
Canadian Tariffs on Imports %
Average rate across each category
Tariff Lines - Specific Examples
HS Code========================================================0105.11.22 Broilers for domestic production: 238%0105.99 Turkeys: 154.5%
1001.90 Common wheat 76.5%1001.10 Durum wheat 49%1003.00 Barley (malting) 94.5%10.06 Rice Free
106.90.32 Milk, cream or butter substitutes, 50% or more dairy content, 212%
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Canadian Boarder Services Agency - Chapter-by-Chapter Customs Tariff – T2011-3http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2011/01-99/tblmod-t2011-03-eng.html
Canadian Tariffs
Source: World Tariff Profiles, 2011. WTO, Geneva
Proportion of “tariff lines” duty-free Max tariff in category
Share of “Harmonized System” (HS) nominclature 6 digit sub-headings with at least one bound tariff line
US Tariffs
Source: World Tariff Profiles, 2011. WTO, Geneva
Japan Tariffs
Source: World Tariff Profiles, 2011. WTO, Geneva
EU Tariffs
Source: World Tariff Profiles, 2011. WTO, Geneva
Examples of TRQ and over-quota tariffs
Source: Canadian Dairy Commission (2011)
Product TRQ (’000 t) Tariff (%)
Skim Milk Powder 0 201.5
Whey Powder 3.2 208.0
Butter 3.3 298.5
Cheese 20.4 245.5
Ice cream 0.484 277.0
Quotas & TRQ’s (tariff rate quotas)
Trade Policy Interventions (Imports)
Non-Tariff Barriers (NTB)Production Standards: Phyto-sanitary restrictions
Labeling, documentation, containers
2009 - US refuses to allow Mexican trucks to carry cargo over U.S. roads (safety concerns)
July 2008 - Product of Canada - virtually all ingredients (98%), processing and labour is Canadian
Made in Canada - manufactured or processed in Canada - ingredients imported or domestic
2002 - Country of Origin Labeling (COOL); fresh pork, beef, lambfresh fruits & vegetables
Pre - 2008 - Product of Canada - 51% Canadian content by value
Trade Policy InterventionsExports
Export taxes (Argentina, developing countries)Export subsidies (EU, US - EEP)Voluntary Export Restrictions (VER’s)
Indirect Policies
Direct or indirect production supportsProduction subsidiesSupports for providing environmental services
Trade Policy Agreements
Countries have different objectives (agendas)
International agreements
Gobal Level WTO (GATT)
Regional European Union, NAFTA, ASEAN, APTA, CARICOM
Bilateral Canada and its dancing partners: Chile, Columbia, Costa Rica, EFTA, Peru, Switzerland, India (in progress 2011)
Economic•self sufficiency•protect producers, consumers•expand exports
Political (domestic constituencies)
Post WWII Environment
Origins of the WTO (ITO)
Why was a “new world order” important?Bretton Woods Agreements July 1944, delegates from 44 nations
IMF, World Bank, GATT/WTOUS Senate: failure to ratify (ITO)
Birth of the GATT
Consensus document
Temporary measures Eliminate trade distorting policies
import barriers (quotas, tariffs)
production subsidies
Multiple “rounds”
Kennedy, Tokyo, Uruguay, Doha
Doha is on life support
Two Country Analytical Model
Compatibility of excess demand and supply relationships
Select one of the two country’s currency for vertical axis of trade sector
Use exchange rate to adjust either ED or ES
Simplifying assumptionsNo transportation costs
No governmental interference
Excess demand & supply framework
OR - assume 1:1 rate of exchange
Two Country Analytical Model
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QImports Exports
Relaxing Simplifying Assumptions
Governmental influence on volume of tradeTariffs, Subsidies
Quotas, Licenses
Exchange rate “management”
Other non-tariff barriers
Non-zero transportation costsHandled in same way as interregional trade
Two Country Analytical ModelAbsolute Tariff
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Two Country Analytical Model Percentage (Ad valorum) Tariff
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Exchange rate devaluation - Importer
Two Country Analytical Model Exporter Devaluation
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Two Country Analytical ModelImport Quota
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Two Country Analytical ModelExport Subsidy
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QImports Exports