1. Class 23 April 17 Last class: 4. Trade policies of importing nations Quiz 6 Today: Result of Quiz 6 5. Trade policies of exporting nations Next class: 5. Trade polices of exporting nations Reading: Important date:

2. 4. Trade policies of importing countries 4.1. Major types of import barriers 4.2. Reasons for import barriers 4.3. Effects of specific import policies 4.4. Related issues

3. 4.4. Issues related to import policies (a) Major differences in the impacts of a tariff and a quota (b) Fixed domestic prices by importing countries: A variable import tax (levy) = P - Pw (c) Is it possible for a large importer to benefit from an import tariff? A graphic analysis: (d) Is it possible for a small importer to benefit from an import tax?

4. 5. Trade policies of exporting countries 5.1. Major export policies 5.2. Reasons for export policies 5.3. Export subsidy 5.4. Export tax 5.5. Price discrimination 5.6. Related topics Special topic: dumping and antidumping

5. 5.1. Major export policies (1) Export subsidy (2) Export tax (3) Price discrimination (4) Domestic price support (subsidy) (5) Technical assistance (6) Government promotion and negotiation …… 5.2. Major reasons for export policies

6. 5.3. Export subsidy (1) A small exporter (a) A graphical analysis (b) A mathematical analysis Qd = 20 - 1 PQs = -1 + 2 P ED: Pw = 8 --------------------------------------------------------------------------------------------------- Export P* Qs Qd CS PS sub. CS+PS-sub --------------------------------------------------------------------------------------------------- No trade 0 7 13 13 84.5 42.25 0 126.75 Free trade 3 8 15 12 72 56.25 0 128.25 An export subsidy of $1/unit 6 9 17 11 60.5 72.25 6 126.75 ---------------------------------------------------------------------------------------------------

7. 5.3. Export subsidy (2) A large exporter (a) A graphical analysis (b) A mathematical analysis Qd = 20 - 1 PQs = -1 + 2 P ED = 24 - 2P --------------------------------------------------------------------------------------------------- Export P* Qs Qd CS PS sub. CS+PS-sub --------------------------------------------------------------------------------------------------- No trade Free trade An export subsidy of $1/unit --------------------------------------------------------------------------------------------------- Please complete the table as a take-home exercise

8. 5.4. Export tax (1) A small exporter (a) A graphical analysis (b) A mathematical analysis Qd = 20 - 1 PQs = -1 + 2 P ED demand by the exporter: Pw = 8 --------------------------------------------------------------------------------------------------- Export P* Qs Qd CS PS tax CS+PS+tax --------------------------------------------------------------------------------------------------- No trade 0 7 13 13 84.5 42.25 0 126.75 Free trade 3 8 15 12 72 56.25 0 128.25 An export tax of $1/unit -------------------------------------------------------------------------------------------------- A general question: Is it possible for a small exporter to benefit from export tax?

9. 5.4. Export tax (2) A large exporter (a) A graphical analysis (b) A mathematical analysis Qd = 20 - 1 PQs = -1 + 2 P ED = 24 - 2P --------------------------------------------------------------------------------------------------- Export P* Qs Qd CS PS tax CS+PS+tax --------------------------------------------------------------------------------------------------- No trade 0 7 13 13 84.5 42.25 0 126.75 Free trade 6 9 17 11 60.5 56.25 0 132.75 An export tax of $1/unit --------------------------------------------------------------------------------------------------- A general question: Is it possible for a large exporter to benefit from export tax?

10. 5.5. Price discrimination (1) How does it work? (2) What are the reasons to do it? (3) Price discrimination in international trade ==> dumping and antidumping

11. 5.6. Related topics (1) Price support -- A major policy of U.S. ag. (1933-85) -- Set a floor (minimum) price and the government purchases the surplus -- Impacts on trade (2) Deficiency payment system -- Developed from the price support policy -- Set a target producer price and the government pays producer the difference between target price and market price (3) Marketing boards ( e.g., Canadian wheat board )