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Trade & Policy Issues

Trade & Policy Issues. Trade Interventions & Trade Agreements Framework for Analyzing International Trade & Trade Policy Interventions. Trade Policy Interventions (Imports). March 2009 - Mexico to raise tariffs on 90 U.S. agr & industrial products, worth more than $2.4 B

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Trade & Policy Issues

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  1. Trade & Policy Issues Trade Interventions & Trade Agreements Framework for Analyzing International Trade & Trade Policy Interventions

  2. Trade Policy Interventions (Imports) March 2009 - Mexico to raise tariffs on 90 U.S. agr & industrial products, worth more than $2.4 B Tariff on fresh grapes - 45% Tariffs - absolute vs ad valorum, variable levy Canadian Tariffs on Imports % Average rate across each category Source: World Tariff Profiles, 2011. WTO Geneva

  3. HS Code ======================================================== 0105.11.22 Broilers for domestic production: 238% 0105.99 Turkeys: 154.5% 1001.90 Common wheat 76.5% 1001.10 Durum wheat 49% 1003.00 Barley (malting) 94.5% 10.06 Rice Free 106.90.32 Milk, cream or butter substitutes, 50% or more dairy content, 212% ======================================================== Tariff Lines - Specific Examples Canadian Boarder Services Agency - Chapter-by-Chapter Customs Tariff – T2011-3 http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2011/01-99/tblmod-t2011-03-eng.html

  4. Canadian Tariffs Proportion of “tariff lines” duty-free Max tariff in category Share of “Harmonized System” (HS) nominclature 6 digit sub-headings with at least one bound tariff line Source: World Tariff Profiles, 2011. WTO, Geneva

  5. US Tariffs Source: World Tariff Profiles, 2011. WTO, Geneva

  6. Japan Tariffs Source: World Tariff Profiles, 2011. WTO, Geneva

  7. EU Tariffs Source: World Tariff Profiles, 2011. WTO, Geneva

  8. Quotas & TRQ’s (tariff rate quotas) Examples of TRQ and over-quota tariffs Source: Canadian Dairy Commission (2011)

  9. Trade Policy Interventions (Imports) Non-Tariff Barriers (NTB) Production Standards: Phyto-sanitary restrictions Labeling, documentation, containers 2009 - US refuses to allow Mexican trucks to carry cargo over U.S. roads (safety concerns) 2002 - Country of Origin Labeling (COOL); fresh pork, beef, lamb fresh fruits & vegetables Pre - 2008 - Product of Canada - 51% Canadian content by value July 2008 - Product of Canada - virtually all ingredients (98%), processing and labour is Canadian Made in Canada - manufactured or processed in Canada - ingredients imported or domestic

  10. Trade Policy Interventions Exports Export taxes (Argentina, developing countries) Export subsidies (EU, US - EEP) Voluntary Export Restrictions (VER’s) Indirect Policies Direct or indirect production supports Production subsidies Supports for providing environmental services

  11. Trade Policy Agreements Political (domestic constituencies) Countries have different objectives (agendas) • Economic • self sufficiency • protect producers, consumers • expand exports International agreements Gobal Level WTO (GATT) Regional European Union, NAFTA, ASEAN, APTA, CARICOM Bilateral Canada and its dancing partners: Chile, Columbia, Costa Rica, EFTA, Peru, Switzerland, India (in progress 2011)

  12. Post WWII Environment Origins of the WTO (ITO) Why was a “new world order” important? Bretton Woods Agreements July 1944, delegates from 44 nations IMF, World Bank, GATT/WTO US Senate: failure to ratify (ITO) • Birth of the GATT • Consensus document • Temporary measures Eliminate trade distorting policies • import barriers (quotas, tariffs) • production subsidies • Multiple “rounds” • Kennedy, Tokyo, Uruguay, Doha • Doha is on life support

  13. Two Country Analytical Model Excess demand & supply framework Compatibility of excess demand and supply relationships Select one of the two country’s currency for vertical axis of trade sector Use exchange rate to adjust either ED or ES • Simplifying assumptions • No transportation costs • No governmental interference OR - assume 1:1 rate of exchange

  14. Two Country Analytical Model Country 2 low price Country 1 High Price Imports Q Exports

  15. Relaxing Simplifying Assumptions Non-zero transportation costs Handled in same way as interregional trade Governmental influence on volume of trade Tariffs, Subsidies Quotas, Licenses Exchange rate “management” Other non-tariff barriers

  16. Two Country Analytical ModelAbsolute Tariff “Country 2” - OR Rest of the world Country 2 Country 1 Imports Q Exports

  17. Two Country Analytical Model Percentage (Ad valorum) Tariff Country 2 Country 1 Imports Q Exports Exchange rate devaluation - Importer

  18. Two Country Analytical Model Exporter Devaluation Country 2 Country 1 Imports Q Exports

  19. Two Country Analytical ModelImport Quota Country 2 Country 1 Imports Q Exports

  20. Two Country Analytical ModelExport Subsidy Country 2 Country 1 Imports Q Exports

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