2.
Other instruments of trade policy
a.
b.
c.
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
d.
e.
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
(1)
(2)
Export credit subsidies

Subsidized loans to buyers

Same analysis as export subsidy
National procurement

(3)
Purchases by government or strongly regulated firms directed to
domestic firms
Red tape barriers
Use health, safety, and customs regulations to limit trade
3.
Summary of trade policy effects