Transcript Trade Policies

TRADE POLICIES (Non-Tariff)
Course #9
Pos M. Hutabarat, PhD
Economic Department, UI
Jakarta, 30 March 2010
Component of GDP
Agriculture
GDP
Industry
Services
Pos M. Hutabarat PhD
Economic Development
primary
industry
services
Economic Activities
(2005)
Country
Agr
1.
2.
3.
4.
USA
Germany
Japan
Korea
5.
6.
7.
8.
9.
Brazil
Malaysia
Thailand
China
Indonesia
10.Egypt
11.Philippines
12.Laos
Pop
(mil)
295
82
128
48
186
25
64
1305
220
74
83
6
GNI/cap
(US$)
43700
34580
38980
15830
3460
4960
2750
1740
1280
1250
1300
440
(%)
1
1
1
4
10
9
10
13
14
14
14
46
Ind
(%)
22
29
31
41
38
50
46
46
41
39
33
28
Serv
(%)
77
70
66
55
52
41
44
41
45
47
53
26
Industrialization Process
Export Oriented
Industrialization
Trade Policies
Import Substitute
Pos M. Hutabarat PhD
Trade and Industrialization
Model Export Promotion:
Development of industrial sector through export
oriented industries, example of Korea, Taiwan,
RRC, Malaysia and Thailand (instrument: duty draw
back, tax incentive, subsidies, currency devaluation, etc)
Model Import Substitution:
Development of industrial sector through
production of previously imported goods example
of Latin America Countries (instrument: high tariff,
quota, non-tariff barriers, etc)
Pos M. Hutabarat PhD
Trade Policies
Tariff (percentage increase on price of imports)
Nominal Tariff
Effective Tariff
Non-Tariff Measures
Quota (limitation of import quantity)
Standards (health, safety)
Dumping/Subsidies
Non-economic issues (environment, labor, Human
Rights, IPR, etc)
Pos M. Hutabarat PhD
Trade Policies
1. Trade Policies as a part of broader
social policy objectives
2. Protection to offset market
imperfection
3. Protection as a response to
international policy distortion
Non-Tariff Measures
1. Quota (limitation of import quantity)
2. VER (limitation of export quantity voluntary)
3. Local Content Requirement
4. National Procurement
5. Export Credit Subsidies
6. Rule of Origin
7. Custom Procedures
8. Standards (health, safety)
9. Dumping/Subsidies
10. Non-economic issues (environment, labor, Human
Rights, IPR, etc)
Tariff
Before Tariff
consumption: Q3
Production : Q2
Import : Q2-Q3
(partial equilibrium)
P
D
S
P1
Pt = Pw (1 + t)
Pt
Pw
Sw
Q2
Q4
Q1
Q5
Pos M. Hutabarat PhD
Q3
Q
After Tariff
Consumption: Q5
Production : Q4
Import : Q4-Q5
Tariff
P
D
S
P1
c
Pt
Pw
a
Q2
f
b
Q4
d
Q1
Q5
Pos M. Hutabarat PhD
Pt = Pw (1 + t)
e
Q3
Sw
Q
Deadweight loss
area abc + def
Quota
P
(limitation of import quantity)
D
S
P1
Pq
Pw
Sw
Q2
Q4
Q1
quota
Q5
Pos M. Hutabarat PhD
Q3
Q
Quota (with increasing Demand)
D’
P
D
S
P1
Pq’
Pq
Pw
Sw
Q2
Q4
Q1
quota
Q5
Pos M. Hutabarat PhD
Q3
Q
Two Ways to Promote ImportCompeting Production
2. Standard
1. Health
2. Safety
Pos M. Hutabarat PhD
Dumping
(1)
Dumping (predatory or economy) when a product is
selling in other countries at less than its normal
value:
1. Its price in domestic market
2. Cost of production (fix cost, variable cost, plus
administrative, selling and general cost)
If there is no comparable products, use like products and
third country
Country can initiate dumping allegation if :
1. There is an injury to domestic industry
Pos M.at
Hutabarat,
2. Period of investigation
leastPhD
one year
Dumping
(2)
If Dumping is hold after final determination, country
can impose anti dumping duties for period of 5
years (during investigation, provisional anti
dumping duties can be imposed)
Midterm review can be asked after 2 year of
implementation
Alleged Country can be escaped from anti dumping
duties by proposing price undertaking
Developing countries import share 2% and cumulative
8%
Pos M. Hutabarat, PhD
Subsidies
1. Financial contribution by government:
(a) Government direct transfer, including loan
guarantee
(b) Forgone government revenue
(c) Government provides goods or services
other than general infrastructures
2. Any form of income and price support
Actionable subsidies if import caused a
serious injury to domestic industries
Pos M. Hutabarat, PhD
Rules of Origin
(1)
Rule of origin are the criteria used to define where
a product was made.
They are an essential parts of trade rules
because a number of policies discriminate
between exporting countries: quota, preferential
tariffs, anti dumping actions, and more.
WTO wants to :
1. Harmonize the rules of origin among all members
2. Require all members to ensure that their rules of origin are
transparent (do not have restricting, distorting, or
disruptive effects on international trade) and administered
Pos M.impartial
Hutabarat, PhDand reasonable manner.
in a consistent, uniform,
Rules of Origin
(2)
Example rules of origin:
1. Wheat flour : change of tariff heading
(CTH)
2. Steel : Substantial transformation
3. Fishes : ship flag
4. AFTA (cumulative 40% member
countries)
Pos M. Hutabarat, PhD
4. Non-Economic Issues
1. Environment (ISO)
2. Labor (children age, prisoner/jail labor)
3. Human Rights (labor strike, basic
facilities)
4. IPR
Pos M. Hutabarat PhD