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Flashcards in Lecture 9 Deck (15)
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1

What are the 8 different types of non tariff barriers?

1. Import quota
2. Dumping
3. Export subsidies, export taxes
4. Voluntary export restraints (VER's)
5. Export embargoes and controls
6. Import subsidies
7. Technical barriers to trade
8. Sanitary and phyto-sanitary restrictions

2

What are the technical barriers to international trade?

1. Technical Regulations
2. Standards
3. Testing, Calibration Inspection
4. Certification
5. Packaging
6. Labeling
7. Other requirements

3

Quota

A physical or value limitation on imports
(exports) of a commodity

4

What are the other types of Import Quotas?

1. Tariff-rate quota (TRQ)
2. Proportional import quota

5

Proportional import quota

also called "mixing regulations" or "domestic content regulations": imports limited to a given percentage of domestic production.

6

Tariff-rate quota (TRQ)

Combination of a tariff and a quota, where a certain amount can be imported duty-free, after which a tariff is imposed on remaining imports.

7

Import quota producers welfare effects:

+ a

8

Import quota consumers welfare effects:

- (a+b+c+d)

9

Import quota government welfare effects:

N/A

10

Import quota traders welfare effects:

C+E

11

Import quota net welfare effects:

e - (b+d)

12

Quota rent

pure excess profit

13

Distribution of quota rents depends on:

1. Foreign exporters vs. domestic importers
2. Alternatives for allocating rights to a quota:
– First-come, first-served
– Political expediency
– Lottery
– Graft

14

How can the government gain from the
existence of quota rents?

1. Auction off the right to import to the highest bidder
2. In the extreme, price = (P‘A – P’ ROW): identical to tariff (but quota holders can be taxed)

15

Problems with Quotas

1. Rigidity − non-responsiveness to price
2. Increases the likelihood of price instability
3. Domestic monopolist will charge higher prices and produce less than with a tariff
4. Creation of excess profits ("quota rents")
5. Likelihood of rent-seeking and corruption