Class notes (Chapter 9, part 2) - University of San Diego Home Pages

Other instruments of trade policy
Export subsidies
Payment to a firm that ships goods abroad
Can be either specific or ad valorem
Import quotas
Restriction on the quantity of a good that can be imported
Licenses to import issued
Quota rents – profits earned by those holding licenses
Voluntary export restraints
Exporting country limits amount of exports
Usually asked for by importing country
Local content requirements
Some fraction of final product must be produced domestically
Can be in terms of physical units or value
Impact of parts suppliers same as a quota
Effective price of parts to buyers is the average of imported and
domestically produced inputs
No government revenue or quota rents – passed on to consumers in price
Other instruments
Export credit subsidies
Subsidized loans to buyers
Same analysis as export subsidy
National procurement
Purchases by government or strongly regulated firms directed to
domestic firms
Red tape barriers
Use health, safety, and customs regulations to limit trade
Summary of trade policy effects