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E.I. (Subject) / trade and trade policy (Lesson)
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- Border price effect Home pays more for units it imported Bsp: M(neu)=100 p(alt)=1€ p(neu)=2,2€ -> loss=1,2*100
- import volume effect loss by less imports
- Border price price foreign producer receives for a good sold in HOME
- Domestic price: Price domestic consumer pays for good
- Rechnung Tariff T T=Border price - Domestic price
- Welfare effects of tariff (s.Graph S.2) : HOME, FOREIGN and WORLD HOME consumer lose A+B+C+D HOME producers gain A HOME government gains tariff revenue C+E -> net HOME welfare effect: E-B-D (positive if tariffs are small, negative if tariffs are large) Border price effect: +L Trade volume effect: -K FOREIGN consumers gain F FOREIGN producer lose F+G+H+I -> net FOREIGN welfare effect: -G-H-I Border price effect: -B Trade volume effect: -D K=B+D, M=G+I HOME: +L-K FOREIGN: -L-M -> WORLD: -K-M
- Trade price effect garin from paying less for imports (L in Graph S.2)
- Trade volume effect impact of lowering imports (K in Graph S.2)
- Price and quantities effect of a tariff HOME consumption falls HOME production rises FOREIGN consumption rises FOREIGN production falls
- Domestically captured rents (DCR) + Welfare effects tariffs quotas + license to domestic holders gap between comsumption and production cannot be larger tan M' -> price rises to p' licence holder can buy goods at border price P'-T and sell for P' -> earns A + B if licences are given to HOME residents: DCR HOME: B-C FOREIGN: -B-D
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- Foreign Captured Rents (FCR) + Welfare effects "Price undertaking": FOREIGN agrees to sell product no lower than P' (generates rents for FOREIGN firms) (garner A+B) quotas and distribution to FOREIGN holders HOME: -A-C FOREIGN: +A-D
- Frictional barriers + Welfare effects technical barriers to trade (TBT) -> e.g. health and safety regulations e.g. Cassis di Dijon case (alcohol) rents dissapear HOME: -A-C FOREIGN: -B-D