Chapter 13 Slide 1Copyright © 2003 Pearson Education, Inc.
Chapter 13 Slide 2Copyright © 2003 Pearson Education, Inc.
The Trade Policy Debate: Export Promotion, Import Substitution, and Economic Integration
Chapter 13
Chapter 13 Slide 3Copyright © 2003 Pearson Education, Inc.
Trade Strategies for Development: Export Promotion versus Import Substitution Export promotion: looking outward and
seeing trade barriers– primary-commodity export expansion
Chapter 13 Slide 4Copyright © 2003 Pearson Education, Inc.
Trade Strategies for Development: Export Promotion versus Import Substitution Export promotion: looking outward and
seeing trade barriers– primary-commodity export expansion– expanding manufactured good exports
Import substitution: looking inward but still paying outward– tariffs, infant industries, and protection
Chapter 13 Slide 5Copyright © 2003 Pearson Education, Inc.
Figure 13.1 Import
Substitution and the
Theory of Protection
Chapter 13 Slide 6Copyright © 2003 Pearson Education, Inc.
Trade Strategies for Development: Export Promotion versus Import Substitution The IS industrialization strategy and
results
Chapter 13 Slide 7Copyright © 2003 Pearson Education, Inc.
Chapter 13 Slide 8Copyright © 2003 Pearson Education, Inc.
Tariff Structures and Effective Protection
p
ppt
The nominal tariff rate, t, is
Wherep’ is the tariff-inclusive pricep is the free trade price
Chapter 13 Slide 9Copyright © 2003 Pearson Education, Inc.
Tariff Structures and Effective Protection
v
vvg
The effective tariff rate, g, is
Wherev’ is the value added per unit of output,inclusive of the tariffv is the value added per unit of outputunder free trade
Chapter 13 Slide 10Copyright © 2003 Pearson Education, Inc.
Chapter 13 Slide 11Copyright © 2003 Pearson Education, Inc.
Trade Strategies for Development: Export Promotion versus Import Substitution The IS industrialization strategy and
results Foreign-exchange rates, exchange
controls, and the devaluation decision
Chapter 13 Slide 12Copyright © 2003 Pearson Education, Inc.
Figure 13.2 Free-Market and Controlled Rates of Foreign Exchange
Chapter 13 Slide 13Copyright © 2003 Pearson Education, Inc.
Summary and Conclusions: Trade Optimists and Trade Pessimists Trade pessimist arguments Trade optimist arguments
Chapter 13 Slide 14Copyright © 2003 Pearson Education, Inc.
Reconciling the Arguments: The Data and Consensus Neither the trade optimists nor the trade
pessimists are always right There are many factors that determine
whether trade is good or bad for a country
Chapter 13 Slide 15Copyright © 2003 Pearson Education, Inc.
South-South Trade and Economic Integration: Looking Outward and Inward The growth of trade among developing
countries Economic integration: theory and
practice Regional trading blocks and the
globalization of trade
Chapter 13 Slide 16Copyright © 2003 Pearson Education, Inc.
Chapter 13 Slide 17Copyright © 2003 Pearson Education, Inc.
South-South Trade and Economic Integration: Looking Outward and Inward The growth of trade among developing
countries Economic integration: theory and
practice Regional trading blocks and the
globalization of trade
Chapter 13 Slide 18Copyright © 2003 Pearson Education, Inc.
Trade Policies of Developed Countries: the Need for Reform Rich-nation tariff and nontariff trade
barriers and the 1995 Uruguay Round
Chapter 13 Slide 19Copyright © 2003 Pearson Education, Inc.
Figure 13.3 The Poor Face High Tariffs
Chapter 13 Slide 20Copyright © 2003 Pearson Education, Inc.
Trade Policies of Developed Countries: the Need for Reform Rich-nation tariff and nontariff trade
barriers and the 1995 Uruguay Round The problem of adjustment assistance Domestic economic policies
Chapter 13 Slide 21Copyright © 2003 Pearson Education, Inc.
Concepts for Review Adjustment
assistance Autarchy Common market Customs union Depreciation Devaluation Dual exchange rate Economic integration
Economic Union Effective rate of
protection Exchange control Exchange rate Export promotion Flexible exchange rate Free-market exchange
rate
Chapter 13 Slide 22Copyright © 2003 Pearson Education, Inc.
Concepts for Review, cont’d
General Agreement on Tariffs and Trade (GATT)
Globalization Import substitution Infant industry International
commodity agreements
Inward-looking development policies
Multi-Fiber Arrangement (MFA)
New protectionism Nominal rate of
protection Nontariff trade barriers
Chapter 13 Slide 23Copyright © 2003 Pearson Education, Inc.
Concepts for Review, cont’d Official exchange rate Outward-looking
development policies Overvalued exchange
rate Parallel exchange rate Quotas Regional trading bloc
Rent seeking Synthetic substitutes Tariffs Trade creation Trade diversion Trade liberalization Trade optimists Trade pessimists
Chapter 13 Slide 24Copyright © 2003 Pearson Education, Inc.
Concepts for Review, cont’d
Uruguay Round Value added
Wage-price spiral World Trade
Organization (WTO)