International Economics
By Robert J. Carbaugh
9th Edition
Chapter 6:
Nontariff Trade Barriers
Carbaugh, Chap. 6
Import quotas
Quotas are a restriction on the quantity of a good that may be imported in any one period (usually below free-trade levels)
Global quotas restrict the total quantity of an import, regardless of origin
Selective quotas restrict the quantity of a good coming from a particular country
Types of non-tariff barriers
Carbaugh, Chap. 6
Import quota: trade & welfare effects
Types of non-tariff barriers
Carbaugh, Chap. 6
Effects of a quota on sugar imports
Types of non-tariff barriers
Carbaugh, Chap. 6
Comparing tariffs and quotas
Types of non-tariff barriers
Carbaugh, Chap. 6
Tariff-rate quota
The tariff-rate quota is a two-tiered tariff
A specified number of goods (up to the quota limit) may be imported at one (lower) tariff rate, while imports in excess of the quota face a higher tariff rate
Types of non-tariff barriers
Carbaugh, Chap. 6
Tariff-rate quota: trade & welfare effects
Types of non-tariff barriers
Carbaugh, Chap. 6
Orderly marketing agreements
Market sharing pact signed by trading partners
Intended to protect less efficient domestic producers
Usually involve voluntary export restraints, or export quotas
Recent trade negotiations have restricted the use of these agreements
Types of non-tariff barriers
Carbaugh, Chap. 6
Effects of a voluntary export quota
Types of non-tariff barriers
Carbaugh, Chap. 6
Domestic content requirements
Rules that require a certain percentage of a product’s total value to be produced domestically
Often has the effect of forcing lower-priced imports to include higher-cost domestic components or be assembled in a higher-cost domestic market
Types of non-tariff barriers
Carbaugh, Chap. 6
Domestic content: trade & welfare effects
Types of non-tariff barriers
Carbaugh, Chap. 6
Subsidies
Domestic subsidy
Payments made to import-competing producers to raise the price they receive above the market price
Export subsidy
Payments and incentives offered to export producers intended to raise the volume of exports
Types of non-tariff barriers
Carbaugh, Chap. 6
Subsidies: trade & welfare effects
Types of non-tariff barriers
Carbaugh, Chap. 6
Subsidies: trade & welfare effects
Types of non-tariff barriers
Carbaugh, Chap. 6
Dumping
The practice of selling a product at a lower price in export markets than at home (or exporting at prices below production cost)
Sporadic dumping - to clear unwanted inventories or cope with excess capacity
Predatory dumping - to undermine foreign competitors
Persistent dumping - reaping greater profits by engaging in price discrimination
Types of non-tariff barriers
Carbaugh, Chap. 6
Other NTBs
Government procurement policies
Social regulations (health, environmental and safety rules can also restrict trade)
Sea transport and freight restrictions
Types of non-tariff barriers
Carbaugh, Chap. 6
