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International Trade > Barriers to Trade
Barriers to Trade
• Tariffs
• Quotas
• Other Barriers
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International Trade > Barriers to Trade
Tariffs
• Tariffs can be levied on goods being imported in a country (import tariff), or
exported from a country (export tariff). They may be levied in order to protect
domestic producers (protective tariff), or to raise revenue for the government
(revenue tariff).
• Specific tariffs levy a fixed duty on a good. Ad valorem tariffs are based on a
percentage of the good's value. Compound tariffs are a combination of specific
and ad valorem tariffs.
• Tariffs often increase domestic producer surplus and the quantity of a good
supplied domestically, but hurt domestic consumer surplus.
Effects of a Tariff
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International Trade > Barriers to Trade
Quotas
• There are two types of quotas: absolute and tariff-rate. Absolute quotas are
quotas that limit the amount of a specific good that may enter a country. Tariffrate quotas allow a quantity of a good to be imported under a lower duty rate; any
amount above this is subject to a higher duty.
• Justifications for the use of quotas include protection for domestic employment
and infant industries, protection against unfair foreign trade practices, and
protection of national security.
• Quotas often hurt domestic consumers and benefit domestic producers. Quotas
may also provide incentives for administrative corruption and smuggling.
Sugar: Tariff-Rate Barriers
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International Trade > Barriers to Trade
Other Barriers
• Specific limitations to trade barriers include local content requirements and
embargoes. This category of barriers comes from trade regulations.
• Customs and administrative procedure barriers include bureaucratic red tape and
anti-dumping practices. This category of barriers comes from government
procedures.
• Governmental participation barriers include government procurement programs,
export subsidies, and countervailing duties. This category of barriers involves the
direct participation of government in trade.
• Technical barriers to trade include sanitary regulations, measurement and labeling
standards, and ingredient standards. This category of barriers involves health,
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safety, and measurement standards.
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Appendix
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International Trade
Key terms
• absolute quota A limitation of the quantity of certain goods that may enter commerce during a specific period.
• countervailing duty A tax levied on an imported article to offset the unfair price advantage it holds due to a subsidy paid to
producers or exporters by the government of the exporting country if such imports cause or threaten injury to a domestic
industry.
• Dumping Selling goods at less than their normal price, especially in the export market.
• embargo A ban on trade with another country.
• quota A restriction on the import of something to a specific quantity.
• tariff A system of government-imposed duties levied on imported or exported goods; a list of such duties, or the duties
themselves.
• tariff-rate quota Allows a specified quantity of imported goods to be entered at a reduced rate of duty during the quota period,
with quantities entered in excess of the quota limit subject to a higher duty rate.
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International Trade
Effects of a Tariff
When a tariff is levied on imported goods, the domestic price of the good rises. This benefits domestic producers by increasing producer surplus, but
domestic consumers see a small consumer surplus.
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International Trade
Sugar: Tariff-Rate Barriers
In the US, the import of sugar is regulated by tariff-rate barriers. In 2012, the US allowed over 150,000 tons of raw cane sugar to be imported from Brazil
at a reduced tariff rate.
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International Trade
What group benefits from the introduction of a tariff?
A) Domestic consumers
B) Domestic producers
C) Foreign exporters
D) Foreign importers
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International Trade
What group benefits from the introduction of a tariff?
A) Domestic consumers
B) Domestic producers
C) Foreign exporters
D) Foreign importers
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International Trade
Assume the domestic price of a good is lower than the world
price. What will happen if the country institutes a tariff?
A) The price of the good will increase and the quantity consumed will
decrease
B) The price of the good will decrease and the quantity consumed will
increase
C) The price of the good will increase and the quantity consumed will
increase
D) The price of the good and the quantity consumed will stay the same
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International Trade
Assume the domestic price of a good is lower than the world
price. What will happen if the country institutes a tariff?
A) The price of the good will increase and the quantity consumed will
decrease
B) The price of the good will decrease and the quantity consumed will
increase
C) The price of the good will increase and the quantity consumed will
increase
D) The price of the good and the quantity consumed will stay the same
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International Trade
Supporters of quotas argue that they are beneficial because
_____________.
A) by limiting cheap imports, quotas give new, inexperienced industries
time to become competitive
B) All of these answers
C) by bolstering domestic demand, quotas protect jobs in the exporting
countries
D) quotas address market failures such as information asymmetry and
moral hazard
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International Trade
Supporters of quotas argue that they are beneficial because
_____________.
A) by limiting cheap imports, quotas give new, inexperienced industries
time to become competitive
B) All of these answers
C) by bolstering domestic demand, quotas protect jobs in the exporting
countries
D) quotas address market failures such as information asymmetry and
moral hazard
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International Trade
A quota that permits a specific quantity of imported merchandise
to enter the country at a reduced rate of duty (tax) is a
___________.
A) absolute quota
B) relative quota
C) soft quota
D) tariff-rate quota
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International Trade
A quota that permits a specific quantity of imported merchandise
to enter the country at a reduced rate of duty (tax) is a
___________.
A) absolute quota
B) relative quota
C) soft quota
D) tariff-rate quota
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International Trade
In generally, the effect of a quota on the domestic economy is a(n)
____________.
A) increase in producer surplus, decrease in consumer surplus, and
decrease in total surplus
B) increase in producer surplus, decrease in consumer surplus, and
increase in total surplus
C) decrease in producer surplus, increase in consumer surplus, and
decrease in total surplus
D) decrease in producer surplus, increase in consumer surplus, and
increase in total surplus
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International Trade
In generally, the effect of a quota on the domestic economy is a(n)
____________.
A) increase in producer surplus, decrease in consumer surplus, and
decrease in total surplus
B) increase in producer surplus, decrease in consumer surplus, and
increase in total surplus
C) decrease in producer surplus, increase in consumer surplus, and
decrease in total surplus
D) decrease in producer surplus, increase in consumer surplus, and
increase in total surplus
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International Trade
A domestic market is flooded with cheap, imported candy that is
priced below the exporting country's own market price. As a
result, the domestic market adds extra taxes to the imported
candy. This represents which of the following trade barriers?
A) Countervailing duties
B) Anti-dumping duties
C) Export subsidies
D) Tariff-rate quotas
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International Trade
A domestic market is flooded with cheap, imported candy that is
priced below the exporting country's own market price. As a
result, the domestic market adds extra taxes to the imported
candy. This represents which of the following trade barriers?
A) Countervailing duties
B) Anti-dumping duties
C) Export subsidies
D) Tariff-rate quotas
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International Trade
In order to be sold in the domestic market, all foreign-produced
computers must contain microprocessor chips that were produced
domestically. This represents which of the following trade
barriers?
A) Embargo
B) Government procurement program
C) Local content requirement
D) Identity standards
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International Trade
In order to be sold in the domestic market, all foreign-produced
computers must contain microprocessor chips that were produced
domestically. This represents which of the following trade
barriers?
A) Embargo
B) Government procurement program
C) Local content requirement
D) Identity standards
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International Trade
A certain breed of bananas is not allowed to be imported in a
country due to the high probability the bananas will harbor an
invasive species of spider. This represents which of the following
types of trade barriers?
A) Phytosanitary measures
B) Bureaucratic delays
C) Labeling standards
D) Anti-dumping duties
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International Trade
A certain breed of bananas is not allowed to be imported in a
country due to the high probability the bananas will harbor an
invasive species of spider. This represents which of the following
types of trade barriers?
A) Phytosanitary measures
B) Bureaucratic delays
C) Labeling standards
D) Anti-dumping duties
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International Trade
Attribution
• Wikipedia. "Tariff." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Tariff
• Wikispaces. "McHenry's AP Wiki - International Trade." CC BY-SA http://mchenry.wikispaces.com/International+Trade
• Wiktionary. "tariff." CC BY-SA 3.0 http://en.wiktionary.org/wiki/tariff
• Wikispaces. "resourcesforhistoryteachers - E.7.3 Define trade barriers, such as quotas and tariffs." CC BY-SA
http://resourcesforhistoryteachers.wikispaces.com/E.7.3+Define+trade+barriers,+such+as+quotas+and+tariffs
• Wikipedia. "Tariff-rate quota." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Tariff-rate_quota
• Wikipedia. "Import quota." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Import_quota
• Wikipedia. "Non-tariff barriers to trade." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Non-tariff_barriers_to_trade#Quotas
• Wiktionary. "quota." CC BY-SA 3.0 http://en.wiktionary.org/wiki/quota
• Wikipedia. "tariff-rate quota." CC BY-SA 3.0 http://en.wikipedia.org/wiki/tariff-rate%20quota
• Wikipedia. "absolute quota." CC BY-SA 3.0 http://en.wikipedia.org/wiki/absolute%20quota
• Wikipedia. "Countervailing duty." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Countervailing_duty
• Wikipedia. "Government procurement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Government_procurement
• Wikipedia. "Dumping (pricing policy)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Dumping_(pricing_policy)
• Wikipedia. "Non-tariff barriers to trade." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Non-tariff_barriers_to_trade#Quotas
• Wiktionary. "Dumping." CC BY-SA 3.0 http://en.wiktionary.org/wiki/Dumping
• Wiktionary. "embargo." CC BY-SA 3.0 http://en.wiktionary.org/wiki/embargo
• Wiktionary. "countervailing duty." CC BY-SA 3.0 http://en.wiktionary.org/wiki/countervailing+duty
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International Trade
• Wikipedia. "Technical barriers to trade." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Technical_barriers_to_trade
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