The document discusses various barriers to international trade, including transportation costs, policy barriers like tariffs and non-tariff barriers, and internal trade costs. It also examines the motivations for countries adopting protectionist policies, such as responding to dumping or trade deficits, protecting domestic employment, and protecting strategic industries. Finally, it outlines some arguments against protectionism, noting the risks of retaliation, market distortion effects like higher consumer prices and costs for exporters.
2. Trade Barriers
Transportation costs
• Freight costs
• Time costs
• Customs Delays
Policy barriers
• Import Tariffs
• Non-tariff barriers
Internal trade and transaction costs
• Information costs
• Contract enforcement costs
• Red tape
3. Trade Barriers
Transportation costs
• Freight costs
• Time costs
• Customs Delays
Policy barriers
• Import Tariffs
• Non-tariff barriers
Internal trade and transaction costs
• Information costs
• Contract enforcement costs
• Red tape
4. Trade Barriers
Transportation costs
• Freight costs
• Time costs
• Customs Delays
Policy barriers
• Import Tariffs
• Non-tariff barriers
Internal trade and transaction costs
• Information costs
• Contract enforcement costs
• Red tape
5. What Motivates Protectionism?
Response to
“Dumping”
Response to chronic
trade gap
Employment
protection
Protect “fledgling” -
infant sectors
Protect key /
strategic industries
Raise revenues for
the government
Response to a
recession / low
demand
6. What Motivates Protectionism?
Response to
“Dumping”
Response to chronic
trade gap
Employment
protection
Protect “fledgling” -
infant sectors
Protect key /
strategic industries
Raise revenues for
the government
Response to a
recession / low
demand
7. What Motivates Protectionism?
Response to
“Dumping”
Response to chronic
trade gap
Employment
protection
Protect “fledgling” -
infant sectors
Protect key /
strategic industries
Raise revenues for
the government
Response to a
recession / low
demand
8. What Motivates Protectionism?
Response to
“Dumping”
Response to chronic
trade gap
Employment
protection
Protect “fledgling” -
infant sectors
Protect key /
strategic industries
Raise revenues for
the government
Response to a
recession / low
demand
9. What Motivates Protectionism?
Response to
“Dumping”
Response to chronic
trade gap
Employment
protection
Protect “fledgling” -
infant sectors
Protect key /
strategic industries
Raise revenues for
the government
Response to a
recession / low
demand
10. What Motivates Protectionism?
Response to
“Dumping”
Response to chronic
trade gap
Employment
protection
Protect “fledgling” -
infant sectors
Protect key /
strategic industries
Raise revenues for
the government
Response to a
recession / low
demand
11. What Motivates Protectionism?
Response to
“Dumping”
Response to chronic
trade gap
Employment
protection
Protect “fledgling” -
infant sectors
Protect key /
strategic industries
Raise revenues for
the government
Response to a
recession / low
demand
21. Q1
Analysis of an import tariff
Price
Domestic
Demand
Output
Q2
Domestic
Supply
World supply
pre-tariffP1
22. Q4Q1
Analysis of an import tariff
Price
Domestic
Demand
Output
Q2
Domestic
Supply
World supply
pre-tariffP1
Supply after tariff
Q3
Imports
after tariff
P2
23. Evaluation – indirect effects of tariffs
• Higher prices• Cost push
inflation risks
• Damages other
industries
• Risk of tit for tat
policies
• Loss of
allocative
efficiency
• Dynamic
effects?
Economic
Efficiency
Retaliation by
affected
nations
Impact on
lower income
groups
Costs and
Inflation
24. Analysis of an import quota for steel
Price
Import
Demand
for steel
Output
Export Supply
of steel (no
quota)
25. Analysis of an import quota for steel
Price
Import
Demand
for steel
Output
Q1
Export Supply
of steel (no
quota)
P1
Import
Quota
Quota
P2
26. Arguments against Protectionism
Risk of Retaliation Market Distortion
Higher prices for
consumers
Regressive effect on
income inequality
By-passing import
controls
Higher costs for
exporters
27. Arguments against Protectionism
Risk of Retaliation Market Distortion
Higher prices for
consumers
Regressive effect on
income inequality
By-passing import
controls
Higher costs for
exporters
28. Arguments against Protectionism
Risk of Retaliation Market Distortion
Higher prices for
consumers
Regressive effect on
income inequality
By-passing import
controls
Higher costs for
exporters
29. Arguments against Protectionism
Risk of Retaliation Market Distortion
Higher prices for
consumers
Regressive effect on
income inequality
By-passing import
controls
Higher costs for
exporters
30. Arguments against Protectionism
Risk of Retaliation Market Distortion
Higher prices for
consumers
Regressive effect on
income inequality
By-passing import
controls
Higher costs for
exporters
31. Arguments against Protectionism
Risk of Retaliation Market Distortion
Higher prices for
consumers
Regressive effect on
income inequality
By-passing import
controls
Higher costs for
exporters
32. Pascal Lamy
“Imports are an
essential
ingredient of a
country’s export
competitiveness.
Around 40 per
cent of the value
of exported
goods is
in fact imported
inputs”
33. Pascal Lamy
“Imports are an
essential
ingredient of a
country’s export
competitiveness.
Around 40 per
cent of the value
of exported
goods is
in fact imported
inputs”
Trade is no
longer about
finished
products or
services. It is
about adding
value by
contributing to a
stage in the
production of a
finished product
or by providing
services.