1. Types of non-tariff barriers
Import quotas
Quota: how much of a good that may be imported in a year (usually below free-trade levels)
Global quotas restrict the total quantity of an import, regardless of origin
Selective quotas restrict the quantity of a good coming from a particular country
Carbaugh, Chap. 6

2. Import quota: trade & welfare effects
Types of non-tariff barriers
Import quota: trade & welfare effects
SUS
SUS+Q
Price ($)
Quota a b c d
SEU
DUS
Carbaugh, Chap. 6

3. Comparing tariffs and quotas
Types of non-tariff barriers
Comparing tariffs and quotas
Tariff restriction
Quota restriction
Price ($)
SUS0
Price ($)
SUS0
SJ1
SJ0
SJ0
DUS0
DUS0
Carbaugh, Chap. 6

4. Tariff-rate quota The tariff-rate quota is a two-tiered tariff
Types of non-tariff barriers
Tariff-rate quota
The tariff-rate quota is a two-tiered tariff
A specified number of goods (up to the quota limit) may be imported at one (lower) tariff rate, while imports in excess of the quota face a higher tariff rate
Carbaugh, Chap. 6

5. Orderly marketing agreements
Types of non-tariff barriers
Orderly marketing agreements
Market sharing pact intended to protect less efficient domestic producers
Usually involve voluntary export restraints, or export quotas
Japanese auto exports
Carbaugh, Chap. 6

6. Domestic content requirements
Types of non-tariff barriers
Domestic content requirements
Rules that require a certain percentage of a product’s total value to be produced domestically
Forces lower-priced imports to include high-cost domestic components or to be assembled by high-cost domestic producer
Carbaugh, Chap. 6

7. Subsidies Domestic subsidy Export subsidy
Types of non-tariff barriers
Subsidies
Domestic subsidy
Payments made to import-competing producers to raise the price they receive above the market price
Export subsidy
Payments and incentives offered to export producers intended to raise the volume of exports
Carbaugh, Chap. 6

8. Subsidies: trade & welfare effects
Domestic subsidy: Payments made to import-competing producers
to raise the price they receive above the market price
SUS0
Price ($)
Subsidy: shifts
domestic supply down and out.
Consumers not hurt.
SUS1 a b SW
DUS
Carbaugh, Chap. 6

9. Subsidies: trade & welfare effects
Export subsidy: Payments and incentives offered to exporter
that raise the volume of exports
SJ0
Price ($) G
Japanese Subsidy of
TV exports lowers
their price to US buyers
SJ1 E F
DUS
Carbaugh, Chap. 6

10. Types of non-tariff barriers
Dumping
The practice of selling a product at a lower price in export markets than at home (or exporting at prices below production cost)
Sporadic dumping - to clear unwanted inventories or cope with excess capacity
Predatory dumping - to undermine foreign competitors
Persistent dumping - reaping greater profits by engaging in price discrimination
Carbaugh, Chap. 6

11. Other NTBs Government procurement policies
Types of non-tariff barriers
Other NTBs
Government procurement policies
Social regulations (health, environmental and safety rules can also restrict trade)
Sea transport and freight restrictions
Carbaugh, Chap. 6