Econ 340 Ch 8

Countervailing Duty

USED when the Foreign government subsidizes its own exporting firms so that they can charge lower prices for the exports. -purpose of which is to raise prices of imports back up to what it would have been without the subsidy

Under the WTO

an importing country is entitled to apply an anti-dumping tariff anytime that a foreign firm is dumping its product.

Policy response to dumping

deadweight loss which is higher than the case of a tariff.

Safeguard Tariffs

imports any product in increased quantities and under conditions that seriously injure domestic producers * impacted country can temporarily raise the tariff when domestic producers are suffering due to import competion ex) steel tariff 2002

A model of Product Dumping

in imperfect competition, firms can charge different prices. -can also change their domestic price and export price to be different from each other

Purpose of Anti-dumping Duty

is to raise the price of the dumped good and protect domestic producers ***fact that the higher price also raises prices for domestic consumers and causes a deadweight loss for the importing country is not taken into account when deciding on whether or not to apply the tariff

Dumping

occurs when a firm sells a product abroad at a price that is either less than the price it charges in its local market, or less than its average cost to produce the product. -Under the rules of the WTO, an importing country is entitled to apply a tariff any time a foreign firm dumps its product on a local market.

Anti-dumping Duty

tariff applied in this case

(ITC) International Trade Commission

which must rule on whether imports have caused "material injury" to the domestic industry.

U.S. Department of Commerce

which rules on whether imports are selling domestically at "less than fair value."

Discriminating Monopoly

-monopolist sells both to its local market and exports to a foreign market -monopolist is able to charge different prices in the two markets.

Price Discrimination

-the firm is able to choose how much different groups of customers pay. -must be some reason that consumers in the high-price market cannot import directly from the low-cost market, make sure that they aren't competing with outside countries for customers in own country.