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Contents

vii

CHAPTER 4

Tariffs ............................................................................................. 111

The Tariff Concept ................................... Types of Tariffs ........................................

112 113 113 114 114 115 117

Specific Tariff ....................................... Ad Valorem Tariff ................................. Compound Tariff .................................. Effective Rate of Protection ......................... Tariff Escalation .......................................

Outsourcing and Offshore-Assembly Provision ................................................

119

Dodging Import Tariffs: Tariff Avoidance and Tariff Evasion ....................................

120

Ford Strips Its Wagons to Avoid High Tariff ..........................................

Smuggled Steel Evades U.S. Tariffs ............. Postponing Import Tariffs .......................... Bonded Warehouse ................................ Foreign-Trade Zone ............................... FTZs Benefit Motor Vehicle Importers ....... Tariff Effects: An Overview ......................... Tariff Welfare Effects: Consumer Surplus

120 121 122 122 122 124 124

and Producer Surplus ................................ 125 Tariff Welfare Effects: Small-Nation Model ..... 127

Trade Protectionism Intensifies as Global Economy Falls into Recession ...................................... 128

Tariff Welfare Effects: Large-Nation Model ..... 131 The Optimum Tariff and Retaliation ......... 134

Gains from Eliminating Import Tariffs ................................................. 135

How a Tariff Burdens Exporters ................... 135

Steel Tariffs Buy Time for Troubled Industry .................................................. 138

Tariffs and the Poor .................................. 139

Arguments for Trade Restrictions ................ Job Protection ....................................... Protection Against Cheap Foreign Labor ..... Fairness in Trade: A Level Playing Field .....

. 140 141 142 143

Maintenance of the Domestic Standard of Living .............................................

Equalization of Production Costs .............. Infant-Industry Argument ....................... Noneconomic Arguments ......................... Petition of the Candle Makers ................. The Political Economy of Protectionism ......

144 145 145 145 147 147

A Supply and Demand View of Protectionism ....................................... 149

Summary ................................................ 150 Key Concepts & Terms .............................. 151 Study Questions ....................................... 151

CHAPTER 5

Nontariff Trade Barriers ................................................................... 155

Import Quota .......................................... 155

Trade and Welfare Effects ....................... 156 Allocating Quota Licenses ........................ 159 Quotas Versus Tariffs ................................ 159 Tariff-Rate Quota: A Two-Tier Tariff ............ 161

Sugar Tariff-Rate Quota Bittersweet for Consumers ...................................... 162

Export Quotas .......................................... 163

Japanese Auto Restraints Put Brakes on U.S. Motorists ...................................... 164

Domestic Content Requirements .................. 165 Subsidies ................................................. 166

Domestic Production Subsidy ................... 166 How ForeignIs Your Car? .................... 168

Export Subsidy ..................................... 169 Dumping ................................................ 170

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

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