Ch6: The Political Economy of International Trade Flashcards Preview

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Flashcards in Ch6: The Political Economy of International Trade Deck (13)
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tax levied on imports (or exports) that effectively raise the cost of imported products relative to domestic products



government payment to a domestic producer


Import Quotas

direct restriction on the quantity of some good that may be imported into a country


Voluntary Export Restraints

quotas on trade imposed by the exporting country, typically at the request of the importing country’s governments


Local Content Requirements

requirement that some specific fraction of a good be produced domestically


Administrative trade policies

are bureaucratic rules designed to make it difficult for imports to enter a country
- policies hurt consumers by limiting choice


Antidumping policies

are designed to punish foreign firms that engage in dumping. The ultimate objective is to protect domestic producers from unfair foreign competition



s variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their “fair” market value


Political arguments

for intervention are concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers)


Economic arguments

for intervention are typically concerned with boosting the overall wealth of a nation (to the benefit of all,both producers and consumers)


infant industry argument (for intervention)

he argument is that governments should temporarily support new industries (with tariffs, import quotas, and subsidies) until they have grown strong enough to meet international competition


Strategic trade policy (for intervention)

government can help raise national income if it can somehow ensure that the firm or firms that gain first-mover advantages in an industry are domestic rather than foreign enterprises


managers perspective (3)

- tariff barriers raise the costs of exporting products to a country
- quotas may limit a firm's ability to serve a country from locations outside of that country
- to conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise