POLITICAL

ECONOMY
POLITICAL
ECONOMY
INTRODU
CTION
INTRODU
FREE
CTION
TRADE
 FREE
TRADE
- refers to a situation where a government does not
attempt to restrict what its citizens can buy from another
-
country or what they can sell to another country

- while many nations are nominally commited to free

trade, they tend to intervene in international trade to
protect the interests of politically important groups
INSTUMENTS
OF TRADE
POLICY
How do governments intervene in international trade?

There are seven main instruments of

trade policy

1. TARRIFS 4. VOLUNTARY EXPORT RESTRAINTS

5. LOCAL CONTENT REQUIREMENTS

2. SUBSIDIES

6. ANTIDUMPLING POLICIES

3. IMPORT QUOTAS 7. ADMINISTRATIVE POLICIES

TARRIF
S
TARRIF
S

A tarrif is a tax levied on imports that effictively

raises the cost of imported products relative to
domestic products
 2 types of tarrifs

SPECIFIC AD VALOREM
TARRIFS TARRIFS
 Tarrifs are
Why do pro-producer and
anti-consumer, and
governments
tarrifs reduce the
impose tarrifs? overall efficiency o the
world economy
SUBSI
DY
SUBSID
Y

A subsidy is a government payment

to a domestic producer
 IMPORT
QUOTAS
AND
VOLUNTA
RY
EXPORT
RESTRAI
 IMPORT
QUOTAS AND
VOLUNTARY
EXPORT IMPORT QUOTA

RESTRAINS
 IMPORT QUOTA

TARIFF RATE QUOTAS

 VOLUNTARY EXPORT
IMPORT QUOTA
RESTRAINTS

TARIFF RATE QUOTAS

 VOLUNTARY EXPORT
IMPORT QUOTA
RESTRAINTS

TARIFF RATE QUOTAS QUOTA RENT

WHO BENEFITS IMPORT QUOTAS AND VOLUNTARY
EXPORT RESTRAINTS?
ADMINISTRATIVE
POLICIES
ADMINISTRATIVE
POLICIES

are bureaucratic rules that are designed to make

it difficult for imports to enter a country
ADMINISTRATIVE
POLICIES
DUMPING

is selling goods in foreign market below their cost of

production, or selling goods in a foreign market at
below their “fair” market value
 THE CASE FOR
GOVERNMENT
INTERVENTION
Why do governments
intervene in trade?
 THERE ARE TWO TYPES OF ARGUMENTS

POLITICAL ARGUMENTS ECONOMIC ARGUMENTS

POLITICAL ARGUMENTS
FOR INTERVENTION
INCLUDES;
 POLITICAL
ARGUMENTS FOR
INTERVENTION
INCLUDES

1. Protecting Jobs
2. Protecting Industries and Important for National Security
3. Retaliating to Unfair Foreign Competition
4. Protecting Consumer from “Dangerous” Products
3. Furthering the Goal of Foreign Policy
6. Protecting the Human Rights of Individuald in Exporting Countries
 ECONOMIC
ARGUMENTS FOR
INTERVENTION
INCLUDES
 ECONOMIC
ARGUMENTS FOR
INTERVENTION
INCLUDES

INFANT INDUSTRY ARGUMENT STRATEGIC TRADE POLICY

 Infant
Industry
Argument

an industry should be pected until it can

develop and be viable and competitive
internationally
 STRATEGIC
TRADE
POLICY

there may be importsnt first mover

advantages, governments can help firms
from their countries attain these advantage
DOMESTI
C
POLICIES
DOMESTIC
POLICIES GOVERNMENTS CAN BE INFLUENCED
BY SPECIAL INTEREST
THANK YOU!
 THANK
YOU!

John Carl Araya Reporter

Maria Cecille Areglado Reporter
Lhanz Jazzpher Ballesteros Powerpoint
Christine Baria Researcher
Mary Joy Berwega Researcher
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