Overview by Assist. Prof. Dr. Hande Hakan
Significance and scope of international economics introduced.
Topics Covered: New Protectionism, Outline, Subsidies, Import and Export Taxes
Government restrictions on the volume of goods to be imported (physical quantity or value).
Example: Importing 100 units of foreign automobiles, with a value cap of $1,000,000.
Protect domestic industry and agriculture.
Prevent balance of payments deficits.
Specific periods for limitations on imports.
Quotas can accompany customs duties.
Common in underdeveloped countries.
Global Quotas
Impose limits based on total import volumes without specifying countries.
Can lead to market inefficiencies.
Allocated Quotas
Distributed among firms based on criteria (e.g., production capacity).
Import licenses granted per quota share.
Tariff Quotas
Quotas in place for set periods but allow imports beyond with higher tariffs.
Higher Prices for Consumers: Reduced competition results in inflated prices.
Domestic Industry Protection: Limits foreign competition, potentially enhancing domestic profits.
Inefficiency and Resource Misallocation: Reduced competition may deter innovation within domestic industries.
Retaliation and Trade Wars: Can provoke countermeasures from affected countries, escalating trade tensions.
Reduced Variety and Quality: Limited imports decrease product selection and may lower quality due to lack of competition.
Impact on Global Trade: Broad use of quotas may disrupt international trade dynamics.
Tariffs: Taxes on imports raising their prices, generating revenue for the government.
Quotas: Limits on quantity, creating economic rent and potential corruption but no direct revenue for government.
Tariffs allow market adjustments; quotas lead to strict limitations, potentially causing shortages.
Complete prohibition of specific goods from entering a country.
Save foreign currency by banning luxury items.
Protect domestic industries from foreign competition.
Reduce external deficits.
Address non-economic issues (e.g., public health).
Often used with import quotas to stabilize currency and control capital outflow.
Objectives include:
Stabilizing national currency.
Protecting foreign exchange reserves.
Managing trade deficits.
Different rates applied to varying product groups, enhancing foreign exchange revenues.
Can result in inefficiencies and competition issues.
Used for labor-intensive goods; less effective than quotas due to varied exporter strategies.
Serve as invisible barriers with added costs due to regulations.
Defined as financial aid to enhance export capabilities and price competitiveness.
Increase export unit prices, decreasing domestic sales while promoting exports; may elicit countervailing duties from importing countries.
EU's Airbus subsidies; Japanese high-tech industry support.
Aimed at making local products competitive against imports; can divert public funds resulting in inefficiencies.
Example: EU Common Agricultural Policy utilizes variable levies to stabilize domestic prices against international fluctuations.
Imposed on specific exports, aiming to regulate supply, boost treasury income, and encourage domestic processing.
Influences global prices; high elasticity of substitutes must be considered.
Politically driven complete trade bans, useful for exerting pressure on specific countries (e.g., US embargoes against Cuba).
The act of selling goods abroad at lower prices than domestic prices, aiming to gain market share.
Sporadic: Occasional excess stock liquidation.
Predatory: Intentionally destroy competition.
Persistent: Long-term strategy for profit maximization.
Anti-dumping duties can be enforced against unfair pricing.
Agreements among firms to control markets through restricted production and pricing.
Difficult to counteract due to jurisdictional limitations.