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International Economics Part 4

International Economics Part 4. Dr. Stefan Kooths BiTS Berlin (winter term 2013/2014) www.kooths.de/bits-ie. Outline. Introduction and Overview Systemizing and Recording Cross-border Economic Activity The Pure Theory of International Trade Trade Policy: Free Trade vs. Protectionism

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International Economics Part 4

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  1. International EconomicsPart 4 Dr. Stefan Kooths BiTS Berlin(winter term 2013/2014) www.kooths.de/bits-ie

  2. Outline • Introduction and Overview • Systemizing and Recording Cross-border Economic Activity • The Pure Theory of International Trade • Trade Policy: Free Trade vs. Protectionism • Protectionism: Goals and instruments • Tariffs • Nontariff-barriers to trade • Export subsidies (dumping) • Economic integration and multilateral trade policy • Free trade: Pros and cons • Foreign Exchange Markets and the Open Macroeconomy • Case Study: The Euro Area Crisis • Summary: The Key Lessons Learnt

  3. Goals of protectionism

  4. Mercantilism

  5. Tariffs vs. nontariff barriers to trade

  6. Outline • Introduction and Overview • Systemizing and Recording Cross-border Economic Activity • The Pure Theory of International Trade • Trade Policy: Free Trade vs. Protectionism • Protectionism: Goals and instruments • Tariffs • Nontariff-barriers to trade • Export subsidies (dumping) • Economic integration and multilateral trade policy • Free trade: Pros and cons • Foreign Exchange Markets and the Open Macroeconomy • Case Study: The Euro Area Crisis • Summary: The Key Lessons Learnt

  7. Tariff as a tax on imports

  8. Types of custom duties • Specifictariff • Ad valoremtariff

  9. Effect on domestic producers

  10. Effect on domestic consumers

  11. Government revenues

  12. Net national effect

  13. Terms-of-trade effect: Small vs. large countries

  14. Nationally „optimal“ tariffs

  15. Outline • Introduction and Overview • Systemizing and Recording Cross-border Economic Activity • The Pure Theory of International Trade • Trade Policy: Free Trade vs. Protectionism • Protectionism: Goals and instruments • Tariffs • Nontariff-barriers to trade • Export subsidies (dumping) • Economic integration and multilateral trade policy • Free trade: Pros and cons • Foreign Exchange Markets and the Open Macroeconomy • Case Study: The Euro Area Crisis • Summary: The Key Lessons Learnt

  16. Types of nontariff barriers

  17. Import quotas: Small country analysis

  18. Allocating import licenses • Fixed favoritism • Auction • Resource-usingprocedures

  19. Import quotas: Large country analysis

  20. „Voluntary“ export restraints

  21. Other nontariff barriers • Productstandards • Domesticcontentrequirements • Governmentprocurement

  22. Outline • Introduction and Overview • Systemizing and Recording Cross-border Economic Activity • The Pure Theory of International Trade • Trade Policy: Free Trade vs. Protectionism • Protectionism: Goals and instruments • Tariffs • Nontariff-barriers to trade • Export subsidies (dumping) • Economic integration and multilateral trade policy • Free trade: Pros and cons • Foreign Exchange Markets and the Open Macroeconomy • Case Study: The Euro Area Crisis • Summary: The Key Lessons Learnt

  23. Dumping vs. fair market value • „Normal“ value • Comparative (pricescharged in domesticmarket) • Cost-based (sellingbelowaveragecost)

  24. Types of dumping • Predatory • Cyclical • Seasonal • Persistent (pricediscrimination)

  25. Small exporting country analysis

  26. Large exporting country analysis

  27. Retaliation

  28. Strategic trade policy: Boing vs. Airbus (1/2)

  29. Strategic tradepolicy: Boeing vs. Airbus (2/2)

  30. Outline • Introduction and Overview • Systemizing and Recording Cross-border Economic Activity • The Pure Theory of International Trade • Trade Policy: Free Trade vs. Protectionism • Protectionism: Goals and instruments • Tariffs • Nontariff-barriers to trade • Export subsidies (dumping) • Economic integration and multilateral trade policy • Free trade: Pros and cons • Foreign Exchange Markets and the Open Macroeconomy • Case Study: The Euro Area Crisis • Summary: The Key Lessons Learnt

  31. Stages of economic integration

  32. Regional economic integration Source: http://en.wikipedia.org/wiki/File:Economic_integration_stages_(World).png

  33. Trade creation and trade diversion

  34. Other effects of economic integration • Increase in competition (reducingmonopoly power) • Lowerprices (staticefficiency) • Higher productivity/lowercost of production (dynamicefficiency) • Lowercostbyexpandingscales of production • More opportunitiesforbusinessinvestments (FDI)

  35. Case study: The European Union

  36. Trade embargoes

  37. International trade disputes

  38. GATT and WTO • GATT (1947) • General Agreement on Tariffs and Trade • WTO (1994) • World Trade Organization • www.wto.org

  39. Outline • Introduction and Overview • Systemizing and Recording Cross-border Economic Activity • The Pure Theory of International Trade • Trade Policy: Free Trade vs. Protectionism • Protectionism: Goals and instruments • Tariffs • Nontariff-barriers to trade • Export subsidies (dumping) • Economic integration and multilateral trade policy • Free trade: Pros and cons • Foreign Exchange Markets and the Open Macroeconomy • Case Study: The Euro Area Crisis • Summary: The Key Lessons Learnt

  40. First best vs. second best

  41. Costs of protection • Loss of welfare (deadweightlosses) • Foreignretaliation • Enforcementcosts • Renk-seekingcosts • Rentstoforeignproducers (VERs) • Dynamic inefficiencies (loss of dynamicefficiency)

  42. Externalities

  43. Promoting domestic production or employment

  44. The infant industry/dying industry arguments

  45. Public revenues

  46. Noneconomic objectives • „National pride“ • National defense • Domesticincomeredistribution

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