International Economics
By Robert J. Carbaugh
9th Edition
Chapter 5:
Nontariff Trade Barriers
Copyright ©2004, South-Western College Publishing
Types of non-tariff barriers
Non-tariff Trade Barriers
import quotas,
voluntary export restraints,
subsidies, and
domestic content requirements.
Carbaugh, Chap. 6 2
Types of non-tariff barriers
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)
Import License
Global quotas restrict the total quantity of an
import, regardless of origin
Problems
Selective quotas restrict the quantity of a good
coming from a particular country
Problems
Monopoly and Prices (vs. Tariffs)
Carbaugh, Chap. 6 3
Types of non-tariff barriers
Allocating Quota Licenses
Historical Market Share
Pro rata Basis
Auctioning
Carbaugh, Chap. 6 4
Types of non-tariff barriers
Quotas vs Tariffs
Protectionism (Volume of Trade)
Impact on Price
Carbaugh, Chap. 6 5
Types of non-tariff barriers
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
Within-quota Rate and Over-quota Rate
License on demand allocation
First Come First Served
Historical Market Share
Auctioning
WTO and Tariff-rate Quota
Carbaugh, Chap. 6 6
Orderly marketing agreements
اتفاقيات التسويق المنظمة
Market sharing pact signed by trading
partners
Intended to protect less efficient domestic
producers
Usually involve voluntary export restraints,
or export quotas
negotiated versus unilateral trade curbs
(Trade Wars)
Recent trade negotiations have restricted
Carbaugh, Chap. 6 7
the use of these agreements
Types of non-tariff barriers
Domestic content requirements
Domestic manufacturers of these products
purchase resources or perform assembly functions
outside the home country, a practice known as
outsourcing or production sharing.
Advantages and Disadvantages
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
Carbaugh, Chap. 6 8
Types of non-tariff barriers
Subsidies
Help improve their trade position by providing domestic
firms a cost advantage
Allows them to market their products at prices lower
than warranted by their actual cost or profit
considerations
Examples: outright cash disbursements, tax concessions,
insurance arrangements, and loans at below-market interest
rates
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
Carbaugh, Chap. 6 9
Types of non-tariff barriers
Dumpingاإلغراق
The practice of selling a product at a lower price in
export markets than at home (or exporting at prices
below production cost)
Sporadic متقطعdumping - to clear unwanted inventories
or cope with excess capacity
Predatory متوحشdumping - to undermine foreign
competitors
Antidumping duties (margin of dumping)
Persistent مستمرdumping - reaping greater profits by
engaging in price discrimination
International Price Discrimination
Home demand is less elastic than the foreign demand
Antidumping Regulations
Carbaugh, Chap. 6 10
Types of non-tariff barriers
Other NTBs
Government procurement policies
Social regulations (health, environmental
and safety rules can also restrict trade)
Sea transport and freight restrictions
Carbaugh, Chap. 6 11