<< Chapter < Page Chapter >> Page >

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

what is the meaning of Dumping
Stephen Reply
Normally the independent variable is plotted on the x-axis. but in economics price which is an independent variable is plotted on y-axis. why ?
Aimal
what is cost
Deepon Reply
Cost is the amount of capital spent on purchasing an item. Or the amount of expenditure incurred in producing a product or rendering service.
Acid
describe the features of micro economics with suitable example
Purusoth Reply
what is economics
ZELISAH Reply
According to Mankiw it is the management of scarce resources.
Aimal
so what should a nation do to minimize scarcity?
Andrew Reply
is there any difference between firm and industry under monopoly
Dipsikha Reply
I think firms come together to form industry
Stephen
There is a well known saying in economics that "there is no such thing as a free lunch". Discuss. Guys any answer
Ernest
Economic,choice,scarcity,opportunity cost
Seyram Reply
hlo
Anil
choice
Seyram
How to we read in hindi
anshu
wt
Abhinav
marshellian demand curve?
Mohsin Reply
Economics is the study of how societies, government, businesses, household and individuals allocate their scarce resources
WISDOM Reply
True
Arebu
true
Tongai
true
NIcky
What is economy
mwas Reply
who was the father of micro economics
Rayappa Reply
Adam Smith
Harsimar
adam Smith
SHAHEEN
smith
Arebu
adam smith
pallavi
adam smith
Shanu
Adam Smith
Bulbul
ppc stands for what?
Deng Reply
Production Possibility Curve.
murshitha
Product possibility boundaries
Tony Reply
what is the difference between equilibrium and quantity demanded
Usama Reply
equilibrium is the point at which demand and supply are equal while quanitity demanded is d quanitity of commodity that people are willing to buy at a particular price
Olayinka
もしもし
minh
Thanks Olayinka
Joven
what's elasticity
sheriff
What is a product possibility boundary describing the labour and capital
Tony
it is responsiness good and service
Dejene
what is mean deamond
Shanu Reply

Get the best Microeconomics course in your pocket!





Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Microeconomics' conversation and receive update notifications?

Ask