McGraw-Hill/Irwin Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8: Analysis of a Tariff

8-2  Chapter Objective To understand the effects of import tariffs on the imposing country and the world. 8.1 Introduction

8-3  Contents  Purposes for imposing a tariff  Types of Tariffs  Ways to measure tariff levels  Effects of a tariff on a small country  Effects of a tariff on a large country

The Evolvement of Tariffs  What is a tariff ?  The origin of tariffs: Tarifs  The Evolvement of Tariffs

Why would a Country Impose a Tariff?  Discourage consumption  Generate revenue  Reduce deficit in the balance of payment  Protect domestic industries

Types of Tariffs  Specific Tariffs 从量税  Ad Valorem Tariffs 从价税

8-7  Import Tariffs  MFN rates  Ordinary rates  Export Tariffs  Transit Duties 过境税

8-8  Import Surtaxes  General Import Surtaxes  Specific Import Surtaxes  Anti-dumping Duties 反倾销税 反倾销税  Countervailing Duties 反补贴税 反补贴税

8-9  Variable Levy 差价税 Common Agricultural Policy 共同农业政策 Target Price Threshold Price Target Price Threshold Price Variable Levy = Threshold Price - CIF Price Variable Levy = Threshold Price - CIF Price

8-10  Preferential duties Lom é Convention 1975 洛美协定ASEAN东盟

8-11  Generalized System of Preferences 普遍优惠制  History UNCTAD 联合国贸发会议 UNCTAD 联合国贸发会议  1964 Geneva  1968 New Delhi  The Group of 77

8-12  Preferences and Coverage Recipient Countries Recipient Countries Products Covered Products Covered Magnitude of Preference Magnitude of Preference

8-13  GSP and China

Customs Tariff and Commodity Classification  Customs Tariff 海关税则 海关税则  Tariff No.  Description of Goods  Rate of Duty

8-15  Commodity Classification  Customs Cooperation Council Nomenclature （ CCCN ） （ CCCN ） 海关合作理事会税则商品目录 海关合作理事会税则商品目录  Standard International Trade Classification 国际贸易标准分类 （ SITIC ） 国际贸易标准分类 （ SITIC ）  Harmonized Commodity Description and Coding System （ HS ） System （ HS ） 商品列名与编码协调制度 商品列名与编码协调制度

8-16 第 76 章 铝及其制品 第 76 章 铝及其制品 7601 未锻轧铝 非合金铝 铝合金 7602 废铝碎料 废铝碎料 7603 铝粉及片状粉末 非片状粉末 片状粉末

Ways to Measure Tariff Level  simple average 简单平均  weighted average 加权平均

What Happens When a Small Country Imposes an Import Tariff?

8-19 Consumer Surplus 消费者剩余 O Y 0 Y PYPY D P0P0 Expenditure Consumer Surplus

8-20 Producer Surplus 生产者剩余 O Y 0 Y PYPY S P0P0 Costs Producer Surplus

8-21 O Y 2 Y 4 Y 0 Y 3 Y 1 Y PYPY P1P1 P0P0 P1+tP1+t H ZF E VG SW+tSW+t SWSW ab c d DdDd SdSd

8-22 Loss in Consumer Surplus: a + b + c + d a : Redistribution Effect c : Revenue Effect b : Production Effect A deadweight loss from inefficient domestic production d : Consumption Effect A deadweight loss from higher price and lower consumption volume b+d : Total deadweight losses

What Happens When a Large Country Imposes an Import Tariff?

8-24 O Y 1 Y 3 Y 2 Y 0 Y PYPY P2P2 P0P0 P1P1 S d+W +t a b c d DdDd SdSd S d+W e t

8-25 a, b, c, d The same as in the small country case. e : terms-of-trade effect Tariff revenue from the exporting country

8-26 Net Welfare effect If e>b+d, domestic welfare If e<b+d, domestic welfare In any case, world welfare

8-27  Nationally Optimal Tariff  Nationally Optimal Tariff t*=1/Sm Sm: Price elasticity of foreign export supply curve

8-28  Nationally Optimal Tariff  Beggar-thy-neighbor policy  Tariff war

The Effective Rate of Protection Under free trade Domestic Value-added (V) V 0 = P f – P i f : imported finished product i : imported inputs

8-30 Under tariff protection V 1 = P f (1+t f ) – P i (1+t i ) If V 1 > V 0, Protection is effective. ERP = = a= P i / P f V 0 = P f – P i V 1 - V 0 V0V0 t f – at i 1- a

8-31 ERP and Tariff Structure Suppose Country A imports X, P f =20, P i =15, a=3/4,.  If t f =10%,t i =0%; ERP=40%.  If t f =10%,t i =10%; ERP=10%.  If t f =10%,t i =20%; ERP=-20%.

8-32 ERP and Tariff Structure If t f > t i, ERP> t f. If t f = t i, ERP= t f = t i. If t f < t i, ERP< t f.

8-33 Summary  Effects of import tariffs Small country Large country  Effective rate of protection

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8-41 World Trade Organization (WTO) Oversees the global rules for government policies toward international trade. More than 150 member countries. Established Oversees the global rules for government policies toward international trade. More than 150 member countries. Established Succeeds and subsumes the General Agreement on Tariffs and Trade (“interim” agreement, 1947). Succeeds and subsumes the General Agreement on Tariffs and Trade (“interim” agreement, 1947). Principles: Principles:  Reductions of barriers to trade  Nondiscrimination among countries, often called the most favored nation (MFN) principle  No unfair encouragement for exports

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