(A) Economic Arguments for Disciplining the Use of Safeguards
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Economic Integration, Trade Diversion, and Welfare Change
Economic Integration, Trade Diversion, and Welfare Change Juyoung Cheong and Kar-yiu Wong University of Washington November 30, 2007 (Version 1.1. Comments Most Welcome) Abstract This paper examines how the volume of trade diverted from a non-member country to a member country during the formation of a new free trade area may be related to the welfare of a member country. The relation is ana- lyzed in the presence of two types of trade: inter-industry trade with perfect competition and intra-industry trade with oligopoly. We found that in the presence of inter-industry trade, a bigger trade volume diverted is generally associated with a smaller change in welfare while in the presence of intra- industry trade with oligopoly, the relation is not so straighforward. We did find that the result in Krishna (1998) that a bigger trade volume diverted implies a higher likelihood of an FTA may not be true. 1 Introduction The welfare impacts of a new preferential trade agreement (PTA) such as a customs union (CU) or a free trade agreement/area (FTA) on the member countries and non-member countries has long been an interesting issue for economists and policy makers. In particular, they want to know how a country may be affected if it chooses to form a new FTA with other countries. For some time, economists had held the position that anything can hap- pen as an PTA represents a movement of a second-best equilibrium to an- other second-best equilibrium, while it is argued that the first-best position of the world is free trade by all countries.1 Viner, in his pioneering work (Viner, 1950), suggested an approach to identifying welfare-improving PTAs and welfare-deteriorating PTAs. -
Estimating the Market Effect of a Trade War: the Case of Soybean Tariffs
Estimating the Market Effect of a Trade War: The Case of Soybean Tariffs Michael K. Adjemian, University of Georgia, Athens, GA1 Aaron Smith, University of California, Davis, CA Wendi He, University of California, Davis, CA Abstract: In 2018, China retaliated to U.S. trade actions by levying a 25% retaliatory tariff on U.S. soybean exports. That tariff shifted market preferences so that Chinese buyers—who make up a substantial share of total world consumption—favored Brazilian soybeans. We use the relative price of a substitute (RPS) method to estimate that the resulting trade disruption effectively drove a wedge into the world soybean market, lowering U.S. prices at Gulf export locations by $0.74/bu on average for about five months, and increasing Brazilian prices by about $0.97/bu, compared to what would have been observed without the tariff in place. By the end of that period, world markets adjusted and the soybean prices in both countries returned to the ex-ante state of near parity, although the U.S. export volume did not recover until the end of the following marketing year. Our price impact estimate is substantially lower than subsequent U.S. government “trade aid” payments to American soybean producers: although actual payments to producers varied based on county-level differences, USDA’s nominal calculation of the commodity- specific payment rate for soybeans under MFP summed to $3.70 for two bushels produced over the course of two years. We project that USDA’s near-$8.5 billion in trade aid to U.S. soybean producers exceeded the tariff damage by about $5.4 billion. -
Developing Countries' Response to Trade Disputes
WPS8640 Policy Research Working Paper 8640 Public Disclosure Authorized Traders’ Dilemma Developing Countries’ Response to Trade Disputes Public Disclosure Authorized Shantayanan Devarajan Delfin S. Go Csilla Lakatos Sherman Robinson Karen Thierfelder Public Disclosure Authorized Public Disclosure Authorized Development Economics Development Prospects Group November 2018 Policy Research Working Paper 8640 Abstract If trade tensions between the United States and certain trade agreements (RTAs) with all regions outside the United trading partners escalate into a full-blown trade war, what States; and (iv) option (iii) and unilaterally liberalize tariffs should developing countries do? Using a global, gener- on imports from the United States. The results show that al-equilibrium model, this paper first simulates the effects joining the trade war is the worst option for developing of an increase in U.S. tariffs on imports from all regions to countries (twice as bad as doing nothing), while forming about 30 percent (the average non-Most Favored Nation RTAs with non-U.S. regions and liberalizing tariffs on tariff currently applied to imports from Cuba and the U.S. imports (“turning the other cheek”) is the best. The Democratic Republic of Korea) and retaliation in kind reason is that a trade war between the United States and its by major trading partners—the European Union, China, major trading partners creates opportunities for developing Mexico, Canada, and Japan. The paper then considers four countries to increase their exports to these markets. Liberal- possible responses by developing countries to this trade war: izing tariffs increases developing countries’ competitiveness, (i) join the trade war; (ii) do nothing; (iii) pursue regional enabling them to capitalize on these opportunities. -
US Tariffs: EU Response and Fears of a Trade War
AT A GLANCE US tariffs: EU response and fears of a trade war On 1 June 2018, US tariffs entered into force for steel and aluminium imports from the EU, Canada and Mexico, following US President Donald Trump's decision not to extend temporary exemptions. Argentina, Australia, Brazil and South Korea managed to obtain permanent exemptions as a result of deals struck with the Trump Administration. For all other countries, the US tariffs had already taken effect at the end of March 2018. After talks with the Trump Administration failed to result in a permanent exemption, the EU responded to the new tariffs by lodging a complaint at the WTO and instituting rebalancing measures on specific US exports. A safeguard investigation on steel imports into the EU is also on-going. Other US trading partners have responded in similar ways, raising fears that this could be the start of a full-blown trade war that would harm economic growth. Background On 23 March 2018, US tariffs of 25 % on steel imports and 10 % on aluminium imports took effect, following two Section 232 investigations that had concluded that such imports threatened to impair US national security. One day earlier, however, President Trump had decided to grant exemptions until 1 May 2018 to the EU as well as to Argentina, Australia, Brazil, Canada, Mexico and South Korea. The purpose of these exemptions was to provide these trading partners with an opportunity to discuss and address the Trump Administration's security concerns. On 30 April 2018, the US President decided to extend these temporary exemptions for another 30 days. -
Export Promotion and the WTO: a Brief Guide Geneva: ITC, 2009
EXPORT PROMOTION AND THE WTO A BRIEF GUIDE EXPORT IMPACT FOR GOOD © International Trade Centre 2009 The International Trade Centre (ITC) is the joint agency of the World Trade Organization and the United Nations. Street address: ITC, 54-56, rue de Montbrillant, 1202 Geneva, Switzerland Postal address: ITC, Palais des Nations, 1211 Geneva 10, Switzerland Telephone: +41-22 730 0111 Fax: +41-22 733 4439 E-mail: [email protected] Internet: http://www.intracen.org EXPORT PROMOTION AND THE WTO A BRIEF GUIDE Geneva 2009 ii ABSTRACT FOR TRADE INFORMATION SERVICES 2009 F-08.01 EXP INTERNATIONAL TRADE CENTRE (ITC) Export Promotion and the WTO: A brief guide Geneva: ITC, 2009. viii, 37 p. Study looking at export promotion schemes which are consistent with international rules on subsidies, and are most frequently used by developing countries – examines the rules contained in the WTO Agreement on Subsidies and Countervailing Measures (ASCM), covering manufactured goods; highlights rules in the WTO Agreement on Agriculture (AoA) on subsidies, covering certain primary or agricultural products; outlines tools such as duty drawback, export credits and export guarantees, which are at the disposal of countries wishing to promote exports; presents and analyses examples of schemes in place in selected countries in Asia, Africa and Latin America. Descriptors: Export Promotion, Subsidies, Agreement on Subsidies and Countervailing Measures, Agreement on Agriculture, WTO, Case Studies. English ITC, Palais des Nations, 1211 Geneva 10, Switzerland The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the International Trade Centre concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. -
Trump's Trade War Timeline: an Up-To-Date Guide
TRADE & INVESTMENT POLICY WATCH BLOG Trump’s Trade War Timeline: An Up-to-Date Guide Chad P. Bown and Melina Kolb, Peterson Institute for International Economics Updated May 17, 2021 This post, originally published on April 19, 2018, will be updated as trade disputes with China and other countries evolve. In 2018, former President Donald Trump started a trade war with the world involving multiple battles with China as well as American allies. Each battle has used a particular US legal rationale, such as calling foreign imports a national security threat, followed by Trump imposing tariffs and/or quotas on imports. Subsequent retaliation by trading partners and the prospect of further escalation risked significantly hampering trade and investment, and possibly the global economy. President Joseph R. Biden Jr. must now determine whether to keep US tariffs and other trade barriers in place or adjust policies in the wake of changing conditions, as well as the COVID-19 pandemic. The timelines below track the development of the most pressing trade conflicts with links to the latest available data and PIIE analysis. TABLE OF CONTENTS BATTLE #1: Solar Panel and Washing Machine Imports Injure US Industries, page 2 BATTLE #2: Steel and Aluminum as National Security Threats, page 3 BATTLE #3: Unfair Trade Practices for Technology, Intellectual Property (IP), page 8 BATTLE #4: Autos as National Security Threat, page 15 BATTLE #5: Illegal Immigration from Mexico, page 16 BATTLE #6: Safeguarding US Semiconductor Supremacy, page 17 References, page 20 1750 Massachusetts Avenue, NW | Washington, DC 20036-1903 USA | +1.202.328.9000 | www.piie.com TRADE AND INVESTMENT POLICY WATCH BLOG BATTLE #1: SOLAR PANEL AND WASHING MACHINE IMPORTS INJURE US INDUSTRIES USITC Recommends Remedies October 31, 2017 The US International Trade Commission finds that imports of solar panels (October 31, 2017) and washing machines (November 21, 2017) have caused injury to the US solar panel and washing machine industries and recommends President Trump impose “global safeguard” restrictions. -
Global Political Economy Theory and Practice Seventh Edition THEODORE H. COM IM R Routledge Taylor & Francis Grou P NEW YORK
Global Political Economy Theory and Practice Seventh Edition THEODORE H. COM IM Routledge R Taylor & Francis Grou p NEW YORK AND LONDON DETAILED CONTENTS Preface xiii Acknowledgments xvii Acronyms and Abbreviations xix PART I Introduction and Overview 1 CHARTER 1 Introduction 2 What is International Political Economy? 3 The IPE Theoretical Perspectives 4 Purposes and Themes ofThis Book 6 Globalization 6 • North-North Relations 8 • North-South Relations 10 Focus of this Book 12 Questions 13 * Key Terms 14 • Further Reading 14 • Notes 14 CHARTER 2 Managing the Global Economy Since World War II: The Institutional Framework 17 Global Economic Relations Before World War II 18 The Mercantilist Period 18 • The Industrial Revolution and British Hegemony 29 • The Decline of British Hegemony and World War I 20 • The Interwar Period 20 • The Institutional Framework Before World War II 21 The Functions of the IM F, World Bank, and GATT 21 The KIEOs and the United Nations 22 The Postwar Economic Institutions and Changing North-South Relations 23 The IMF, World Bank, and WTO 26 • The OECD 28 •The G5, G7, G8, andG20 29 The Postwar Economic Institutions and International Development 31 The KIEOs and the Centrally Planned Economies 39 IMonstate Actors 42 The 2008 Global Financial Crisis: A Turning Point? 43 Questions 44 • Key Terms 45 • Further Reading 45 • Notes 46 vi DETAILED CONTENTS VÜ PART II Theoretical Perspectives 51 CHARTERS Neomercantilism 55 BasicTenets of Neomercantilism 55 The Role of the Individual, the State, and Societal Groups 55 • The Nature and Purpose of International Economic Relations 56 • The Relationship Between Politics and Economics 56 • The Causes and Effects of Globalization 57 The Mercantilists 57 Neomercantilism and the Industrial Revolution 58 Neomercantilism in the Interwar Period 59 Neomercantilism After World War II 60 The Revival of Neomercantilist IRE 60 Hegemonie Stability Theory and U.S. -
The Risks of Protectionism
Box 1 THE RISKS OF PROTECTIONISM Since the intensifi cation of the global fi nancial crisis in September 2008, the sharp contraction in global trade has been a key factor propagating the economic downturn across borders, making it a truly global phenomenon.1 At the same time, protectionist pressures have been rising worldwide, as signalled by policy statements and opinion polls, as well as by recent developments in multilateral, regional and bilateral trade negotiations.2 Meanwhile anecdotal evidence of discrimination against foreign suppliers of goods and services has also been emerging. Against this background, this box discusses recent features of protectionism and the adverse implications for competitiveness, economic activity and welfare. Gauging the full extent of recent protectionist initiatives is far from easy. Relevant data become available with considerable delay and many forms of non-tariff barriers or complex forms of protection are very diffi cult to identify and quantify. Often statistics on the use of contingent protection, including safeguard measures, anti-dumping and countervailing duties, are used as an early indicator of trade protectionism. However, according to the World Trade Organization, signifi cant gaps exist in the empirical evidence on contingent protection, making it diffi cult to gather general trends from these data.3 Hence, the assessment of protectionist trends necessarily needs to rely on indirect evidence. Econometric analysis by the World Trade Organization suggests that the frequency of anti- dumping actions, countervailing duties and safeguards seems to be linked to the business cycle, with some statistical evidence of an increase in global anti-dumping activity during macroeconomic downturns. -
Dumping, Protectionism and Free Trade
DUMPING, PROTECTIONISM AND FREE TRADE Ron Sheppard Catherine Atkins Views expressed in Agribusiness and Economics Research Unit Discussion Papers are those of the author(s) and do not necessarily reflect the views of the Director, other members of staff, or members of the Management Committee Discussion Paper No.140 September 1994 Agribusiness & Economics Research Unit PO Box 84 Lincoln University CANTERBURY Telephone No: (64) (3) 325 2811 Fax No: (64) (3) 325 3847 ISSN 1170-7607 ISBN 0-909042-01-2 AGRIBUSINESS & ECONOMICS RESEARCH UNIT The Agribusiness and Economics Research Unit (AERU) operates The major research areas supported by the AERU include trade from Lincoln University providing research expertise for a wide policy, marketing (both institutional and consumer), accounting, range of organisations concerned with production, processing, finance, management, agricultural economics and rural sociol distribution, finance and marketing. ogy. In addition to the research activities, the AERU supports conferences and seminars on topical issues and AERU staff are The AERU operates as a semi-commercial research agency involved in a wide range of professional and University related Research contracts are carried out for clients on a commercial extension activities. basis and University research is supported by the AERU through sponsorship of postgraduate research programmes. Research Founded as the Agricultural Economics Research Unit in 1962 clients include Government Departments, both within New from an annual grant provided by the Department of Scientific and Zealand and from other countries, international agencies, New Industrial Research (DSIR), the AERU has grown to become an Zealand companies and organisations, individuals and farmers. Independent, major source of business and economic research Research results are presented through private client reports, expertise. -
Chapter 6 Subsidies and Countervailing Measures
CHAPTER 6 SUBSIDIES AND COUNTERVAILING MEASURES 1. OVERVIEW OF RULES (1) Subsidies and Countervailing Measures Subsidies have been provided widely throughout the world as a tool for realizing government policies, in such forms as grants (normal subsidies), tax exemptions, low-interest financing, investments and export credits. There are six primary categories of subsidies, divided by purpose: 1) export subsidies, 2) subsidies contingent upon the use of domestic over imported goods, 3) industrial promotion subsidies, 4) structural adjustment subsidies, 5) regional development subsidies, and 6) research and development subsidies. By beneficiary, there are two primary categories: 1) subsidies that are not limited to specific businesses or industries (non-specific subsidies), and 2) subsidies that are limited to specific businesses and industries (specific subsidies). Although governments articulate ostensibly legitimate goals for their subsidy programmes, it is widely perceived that government subsidies may give excessive protection to domestic industries. In such cases, subsidies act as a barrier to trade, by distorting the competitive relationships that develop naturally in a free trading system. Exports of subsidized products may injure the domestic industry producing the same product in the importing country. Similarly, subsidized products may gain artificial advantages in third- country markets and impede other countries’ exports to those markets. Because of this potential the WTO Agreements prohibit with respect to industrial goods any export subsidies and subsidies contingent upon the use of domestic over imported goods, as having a particularly high trade-distorting effect. Furthermore, even for subsidies that are not prohibited, it allows Member countries importing subsidized goods to enact countermeasures, such as countervailing duties if such goods injure the domestic industry and certain procedural requirements are met . -
Safeguards: Section 201 of the Trade Act of 1974
Updated January 13, 2021 Safeguards: Section 201 of the Trade Act of 1974 On January 23, 2018, President Trump proclaimed a four- Factors the ITC must consider when determining injury year safeguard measure on imports of certain crystalline include (1) the significant idling of production facilities; (2) silicon photovoltaic cells (CSPV) cells and modules, and a the inability of a significant number of firms to carry out three-year safeguard on large residential washing machines. domestic production at a reasonable level of profit; and (3) These safeguards, still in force, were issued under Section significant unemployment or underemployment within the 201 of the Trade Act of 1974 (19 U.S.C. §2251), and U.S. industry. The ITC also considers import trends and imposed additional tariffs and quotas on U.S. imports of other factors, as well as declines in production, profits, these products. The safeguards were instituted based on wages, productivity, and employment. The ITC makes its findings by the U.S. International Trade Commission (ITC) injury determination based on a vote of the Commissioners. that the goods are being imported into the United States in If the Commission is equally divided, the President may such increased quantities that they are a substantial cause of select either option. serious injury to U.S. manufacturers. The ITC also recommended possible steps to remedy the injury. Figure 1. Section 201 Timeline What Is Section 201? Section 201 or “safeguard” actions are designed to provide temporary relief for a U.S. industry (for example, additional tariffs or quotas on imports) in order to facilitate positive adjustment of the industry to import competition. -
The Safeguard Measure/VER Dilemma: the Jekyll and Hyde of Trade Protection
Northwestern Journal of International Law & Business Volume 15 Issue 1 Fall Fall 1994 The aS feguard Measure/VER Dilemma: The ekyJ ll and Hyde of Trade Protection Ernesto M. Hizon Follow this and additional works at: http://scholarlycommons.law.northwestern.edu/njilb Part of the International Trade Commons Recommended Citation Ernesto M. Hizon, The aS feguard Measure/VER Dilemma: The eJ kyll and Hyde of Trade Protection, 15 Nw. J. Int'l L. & Bus. 105 (1994-1995) This Article is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized administrator of Northwestern University School of Law Scholarly Commons. The Safeguard Measure/VER Dilemma: The Jekyll and Hyde of Trade Protection Ernesto M. Hizon* I. INTRODUcTION AND OVERVIEW The safeguard measure, or the escape clause mechanism provided in Article XIX of GAIT 1947 has always been the "ugly duckling" in the palette of attractive defensive trade options available to states who wish to withdraw from the Article XI obligation of the 1947 Agreement prohibiting quantitative restrictions on imports. But un- like the antidumping and countervailing duty option which targets "unfair trade," Article XIX deals not with the inherent "fairness" of the onslaught of imports, but merely furnishes a temporary escape hatch for domestic producers to adapt to serious competition from foreign manufacturers. Safeguard measures are thus viewed as "emergency" procedures, allowing a party to deal with an exceptional situation (arising from "unforeseen developments") which causes or threatens "serious in- jury" to domestic producers of like or competing products.