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Trade policy at the national level

Yet another dimension of trade policy, along with international and regional trade agreements, happens at the national level. The United States, for example, imposes import quotas on sugar, because of a fear that such imports would drive down the price of sugar and thus injure domestic sugar producers. One of the jobs of the United States Department of Commerce is to determine if imports from other countries are being dumped. The United States International Trade Commission—a government agency—determines whether domestic industries have been substantially injured by the dumping, and if so, the president can impose tariffs that are intended to offset the unfairly low price.

In the arena of trade policy, the battle often seems to be between national laws that increase protectionism and international agreements that try to reduce protectionism, like the WTO. Why would a country pass laws or negotiate agreements to shut out certain foreign products, like sugar or textiles, while simultaneously negotiating to reduce trade barriers in general? One plausible answer is that international trade agreements offer a method for countries to restrain their own special interests. A member of Congress can say to an industry lobbying for tariffs or quotas on imports: “Sure would like to help you, but that pesky WTO agreement just won’t let me.”

If consumers are the biggest losers from trade, why do they not fight back? The quick answer is because it is easier to organize a small group of people around a narrow interest versus a large group that has diffuse interests. This is a question about trade policy theory. Visit this website and read the article by Jonathan Rauch.

In newspaper headlines, trade policy appears mostly as disputes and acrimony. Countries are almost constantly threatening to challenge the “unfair” trading practices of other nations. Cases are brought to the dispute settlement procedures of the WTO, the European Union, NAFTA, and other regional trading agreements. Politicians in national legislatures, goaded on by lobbyists, often threaten to pass bills that will “establish a fair playing field” or “prevent unfair trade”—although most such bills seek to accomplish these high-sounding goals by placing more restrictions on trade. Protesters in the streets may object to specific trade rules or to the entire practice of international trade.

Through all the controversy, the general trend in the last 60 years is clearly toward lower barriers to trade. The average level of tariffs on imported products charged by industrialized countries was 40% in 1946. By 1990, after decades of GATT negotiations, it was down to less than 5%. Indeed, one of the reasons that GATT negotiations shifted from focusing on tariff reduction in the early rounds to a broader agenda was that tariffs had been reduced so dramatically there was not much more to do in that area. U.S. tariffs have followed this general pattern: After rising sharply during the Great Depression, tariffs dropped off to less than 2% by the end of the century. Although measures of import quotas and nontariff barriers are less exact than those for tariffs, they generally appear to be at lower levels, too.

Thus, the last half-century has seen both a dramatic reduction in government-created barriers to trade, such as tariffs, import quotas, and nontariff barriers, and also a number of technological developments that have made international trade easier, like advances in transportation, communication, and information management. The result has been the powerful surge of international trade.

Key concepts and summary

Trade policy is determined at many different levels: administrative agencies within government, laws passed by the legislature, regional negotiations between a small group of nations (sometimes just two), and global negotiations through the World Trade Organization. During the second half of the twentieth century, trade barriers have, in general, declined quite substantially in the United States economy and in the global economy. One reason why countries sign international trade agreements to commit themselves to free trade is to give themselves protection against their own special interests. When an industry lobbies for protection from foreign producers, politicians can point out that, because of the trade treaty, their hands are tied.

References

United States Department of Labor. Bureau of Labor Statistics. 2015. “Employment Situation Summary.” Accessed April 1, 2015. http://www.bls.gov/news.release/empsit.nr0.htm.

United States Department of Commerce. “About the Department of Commerce.” Accessed January 6, 2014. http://www.commerce.gov/about-department-commerce.

United States International Trade Commission. “About the USITC.” Accessed January 6, 2014. http://www.usitc.gov/press_room/about_usitc.htm.

Questions & Answers

In perfect competition, some firms make profit, others breakeven and others make losses. Explain
ALVIN Reply
define law of demand and draw demand curve
Naseer Reply
state that the higher the price of a product the lower the quantity demanded
nonduduzo
what is the price elasticity of demand a unit free measure of the sensitivity of the quantity demand to a price change?
ada Reply
what is normative economics
kanakadurga Reply
In normative economics we try to understand whether a mechanism is desirable or not.
arshad
not
Mark
consider the market for chocolate chip cookies .suppose there is an increase in the price of cake flour used in the production of chocolate chip cookies . Demonstrate graphically and explain the effects this will have on the equilibrium price and quantity of chocolate chip cookies.
Costa Reply
what is price demand?
Alamin Reply
what is the price demand ?
Alamin
what is cardinal approach?
Alamin
importance of elasticity to an economy
Nayiga Reply
what is elasticity
Costa Reply
elasticity refers to the measurement of a percentage change of one economic variable in response to a change in another. Primarily, this percentage change will follow a change in price relative to changes in other factors.
Abdullahi
When desire of goods increases what is the respond of its prices?
abubakar Reply
Then definitely price of Good will increase, As Demand has direct relation with the price
Alam
Right
abubakar
Qd=200 and Qs=5+2p . find the equilibrium price and quantity
Margret Reply
what is mean by 2 p
Alam
as Q is Quantity d for demand and S for supply and what is p stand for
Alam
at equilibrium quantity demand is equal to quantity supply therefore Qd=Q's 200-p=5+2p 200-5=2p+p 195=3p p = 65 thus equilibrium price is equal to 65 and equilibrium quantity is equal to 195
Wani
2 p means price of product is 2
Wani
what is de law of demand
NAANMET Reply
All other things been equal, the law of states that the higher the price of a commodity the higher the quantity demanded. Vice versa
Nancy
the law of demand state that as the price of the goods increase the quantity demand decrease. considering all other factor to be constant.
Zaiveisho
Qd= 200 and Qs= -5+2p .how do you find the equilibrium price and quantity?
Margret Reply
what are the demands of this Question ... and how do i answer it ? ... Some occupations such as nursing are vital but are paid very little .Other such as financial advisor are not vital but are paid highly. How far the economic theory explain this situation?
Kudakwashe Reply
Is my answer correct or not?
BIZUNEH Reply
how do we derive an engel curve?
Dhurani Reply

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Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
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