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Free trade and its benefits

OutlineIntroduction: Warm-upProtectionism explanationNon-Tariff BarriersReasons for NTBTrade liberalisation explanationFree trade frameworkPotential benefitsReferencesQ&A

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Слайд 1Free trade and its benefits
Kirill Perekrestov
University of Toronto
kirhome1995@mail.ru
July 19, 2016
Toronto,

Canada

Free trade and its benefitsKirill PerekrestovUniversity of Torontokirhome1995@mail.ruJuly 19, 2016Toronto, Canada

Слайд 2Outline
Introduction: Warm-up
Protectionism explanation
Non-Tariff Barriers
Reasons for NTB
Trade liberalisation explanation
Free trade framework
Potential

benefits
References
Q&A




OutlineIntroduction: Warm-upProtectionism explanationNon-Tariff BarriersReasons for NTBTrade liberalisation explanationFree trade frameworkPotential benefitsReferencesQ&A

Слайд 3Warm-up
Free trade is a policy which does not restrict imports

from, or exports to, other countries. (1976, Brooks)
Protectionism is the

economic policy of restraining trade between countries through methods such as tariffs on imported goods, restrictive quotas (1976, Brooks)
Warm-upFree trade is a policy which does not restrict imports from, or exports to, other countries. (1976,

Слайд 4Protectionism and Free Trade

Protectionism and Free Trade

Слайд 5Protectionism

Protectionism

Слайд 6Protectionism
Means by which trade between countries is restricted in some

way – normally through measures to reduce the number of

imports coming into a country
Main means are:
Tariffs
Quotas
Non-Tariff Barriers
ProtectionismMeans by which trade between countries is restricted in some way – normally through measures to reduce

Слайд 7Protectionism
Tariff: A tax on a good coming into a country

(1983, Price)

Quota: Physical restriction on the number of goods coming

into a country (1983, Price)
ProtectionismTariff: A tax on a good coming into a country (1983, Price)Quota: Physical restriction on the number

Слайд 8Impact of a Tariff on Steel
Price of Steel
(US $

per kg)
Quantity of Steel Bought and
Sold from Abroad
S
D
20
S +

Tariff

Amount of the tariff per unit

500

28

350

Impact of a Tariff on SteelPrice of Steel (US $ per kg)Quantity of Steel Bought and Sold

Слайд 9Impact of a Quota on Steel
Price of Steel
(US $

per Kg)
Quantity of Steel Bought and
Sold from Abroad
S
D
20
500
Pre-trade position

before a quota.

Quota level

250

30

The quota restricts the supply to a set amount (250 in the example) which is likely to result in a shortage of this good and a subsequent rise in its price.

Impact of a Quota on SteelPrice of Steel (US $ per Kg)Quantity of Steel Bought and Sold

Слайд 10A price of the good increases and makes it less

competitive

RESULTS

A price of the good increases  and makes it less competitiveRESULTS

Слайд 11Non-Tariff Barriers
Any methods not covered by a tariff or quota,

most usually:
Rules
Regulations
Voluntary Export Restraints (VERs)
Legislation
Exacting Standards or Specifications

Non-Tariff BarriersAny methods not covered by a tariff or quota,  most usually:RulesRegulationsVoluntary Export Restraints (VERs)LegislationExacting Standards

Слайд 12Non-Tariff Barriers
Goal is not to prevent trade but to make

the costs much higher

Examples include setting exacting standards on fuel

emissions from cars, the documentation required to be able to sell drugs in different countries, the ingredients in products – some of which may be banned in the destination country
Non-Tariff BarriersGoal is not to prevent trade but to make the costs much higherExamples include setting exacting

Слайд 13Reasons
Protect domestic industries
Protect domestic employment
Strategic reasons
Political pressures
Prevent ‘Dumping’ – selling

goods in the destination country below cost to break into

that market (1987, Mactavish)
ReasonsProtect domestic industriesProtect domestic employmentStrategic reasonsPolitical pressuresPrevent ‘Dumping’ – selling goods  in the destination country below

Слайд 14Trade Liberalisation
Aims to free up world trade and break down

the barriers to international trade
Basic philosophy rests on the principle

of comparative advantage (produce sth at the lowest cost)
Talks to achieve trade liberalisation have been ongoing for many years

Trade LiberalisationAims to free up world trade  and break down the barriers  to international tradeBasic

Слайд 15Free trade framework
GATT – General Agreement on Tariffs and Trade
First

signed in 1947 – talks on-going since then!
Uruguay Round 1994

– set up the World Trade Organisation (WTO) as well as agreements covering a range of trade liberalisation measures
WTO provides the forum through which trade issues can be negotiated and works to help implement and police trade agreements

https://www.youtube.com/watch?v=6CPOhDZSHLI

Free trade frameworkGATT – General Agreement on Tariffs  and TradeFirst signed in 1947 – talks on-going

Слайд 16Potential benefits
Promotes international specialisation and increases world output
Promotes efficient use

and allocation of world resources
Allows developing countries access to the

heavily protected markets of the developed world thus helping promote development
Facilitates the working of the international market system
Potential benefitsPromotes international specialisation  and increases world outputPromotes efficient use and allocation  of world resourcesAllows

Слайд 17Trade Liberalisation

Trade Liberalisation

Слайд 18References
Baier, Scott L. and Jeffrey H. Bergstrand, 2004, "Economic Determinants

of Free Trade Agreements," Journal of International Economics, 64(1), p.

29-63.

Arkolakis, Costas, Arnaud Costinot and Andrés RodrÍguez-Clare, 2012, "New Trade Models, Same Old Gains?" American Economic Review 102(1), 2012: 94-130.

Broda, Christian and David E Weinstein, 2006, "Globalization and the Gains from Variety," The Quarterly Journal of Economics, 121(2), p.541-85.

ReferencesBaier, Scott L. and Jeffrey H. Bergstrand, 2004,

Слайд 19Thank you
kirhome1995@mail.ru

Thank youkirhome1995@mail.ru

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