【正文】 e. – Triangle b is the production distortion loss and triangle d is the consumption distortion loss. – The terms of trade gain arises because a tariff lowers foreign export prices. Costs and Benefits of a Tariff 31 ? If the terms of trade gain is greater than the efficiency loss, the tariff increases welfare for the importing country. – In the case of a small country, the tariff reduces welfare for the importing country. Costs and Benefits of a Tariff 32 Figure 810: Net Welfare Effects of a Tariff PT PW P*T b d e D = efficiency loss (b + d) = terms of trade gain (e) Imports S Price, P Quantity, Q Costs and Benefits of a Tariff 33 ? Export Subsidies: Theory ? Export subsidy – A payment by the government to a firm or individual that ships a good abroad – When the government offers an export subsidy, shippers will export the good up to the point where the domestic price exceeds the foreign price by the amount of the subsidy. – It can be either specific or ad valorem. Other Instruments of Trade Policy 34 b a Figure 811: Effects of an Export Subsidy Other Instruments of Trade Policy PS PW P*S Price, P Quantity, Q Exports g f e Subsidy d c = producer gain (a + b + c) = consumer loss (a + b) = cost of government subsidy (b + c + d + e + f + g) D S 35 ? An export subsidy raises prices in the exporting country while lowering them in the importing country. ? In addition, and in contrast to a tariff, the export subsidy worsens the terms of trade. ? An export subsidy unambiguously leads to costs that exceed its benefits. Other Instruments of Trade Policy 36 Figure 812: Europe’s Common Agricultural Program Other Instruments of Trade Policy Price, P Quantity, Q S D EU price without imports World price = cost of government subsidy Support price Exports 37 ? Import Quotas: Theory ? An import quota is a direct restriction on the quantity of a good that is imported. – Example: The United States has a quota on imports of foreign cheese. ? The restriction is usually enforced by issuing licenses to some group of individuals or firms. – Example: The only firms allowed to import cheese are certain trading panies. ? In some cases (. sugar and apparel), the right to sell in the United States is given directly to the governments of exporting countries. Other Instruments of Trade Policy 38 ? An import quota always raises the domestic price of the imported good. ? License holders are able to buy imports and resell them at a higher price in the domestic market. – The profits received by the holders of import licenses are known as quota rents. Other Instruments of Trade Policy 39 ? Welfare analysis of import quotas versus of that of tariffs – The difference between a quota and a tariff is that with a quota the government receives no revenue. – In assessing the costs and benefits of an import quota, it is crucial to determine who gets the rents. – When the rights to sell in the domestic market are assigned to governments of exporting countries, the transfer of rents abroad makes the costs of a quota substantially higher than the equivalent tariff. Other Instruments of Trade Policy 40 Price in . Market 466 World Price 280 b c d Demand a Supply Price, $/ton Quantity of sugar, million tons Figure 813: Effects of the . Import Quota on Sugar Other Instruments of Trade Policy Import quota: million tons = consumer loss (a + b + c + d) = producer gain (a) = quota rents (c) 41 ? Voluntary Export Restraints ? A voluntary export restraint (VER) is an export quota administered by the exporting country. – It is also known as a voluntary restraint agreement (VRA). ? VERs are imposed at the request of the importer and are agreed to by t