Chapter 10: Pushing Exports

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Chapter 10 Pushing Exports

• Topics in chapter 10
• What do we mean by dumping?
• How should the importing country respond to
  dumping?
• Export subsidies
• Countervailing duties
• Strategic trade policy

2
Dumping

• Selling exports at a price that is too low, a
  price below normal value or fair market value
• The export price is lower than the price charged
  for comparable domestic sales in the home market
  of the exporter.
• The export price is lower than the full unit cost
  (including a profit margin).

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How do companies dump?

• Various forms of dumping
• Predatory dumping
• Cyclical dumping
• Seasonal dumping
• Persistent dumping (price discrimination)
• Is dumping good or bad for you?
• Should the importing country be allowed to
  retaliate, and if yes, how?
• What exactly is unfair trade?

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Initiators of Antidumping Cases
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Export subsidies

• Countries sometimes subsidise exports
• Can be fairly open or hidden away such as low
  interest loans
• Quite common in agricultural trade
• Export subsidies lowers price paid by foreign
  buyers but increases price paid by domestic
  buyers
• Export subsidies normally reduce national welfare
  in the exporting country

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Export subsidies figure 10.3
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Export subsidies large country

• Export subsidies may be even more harmful in the
  large country case, since terms of trade may be
  worsened
• Export subsidies are illegal and may be met
  with retaliatory measures

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Export subsidies may turn an importer into an
exporter

• How export subsidies may turn an importer into an
  exporter is shown in figure 10.5
• Assume that the world price is 2
• The exporters now receive a 2 subsidy
• What happens to trade structure and welfare?

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Countervailing duties - figure 10.6
10
Strategic trade policy
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Strategic trade policy