MACROECONOMICS IN THE GLOBAL ENVIRONMENT INTERNATIONAL ECONO

MACROECONOMICS IN THE GLOBAL ENVIRONMENT

INTERNATIONAL ECONOMICS

The World Trade Organisation (WTO) is founded on the principles of national treatment and non-discrimination

(a)    Explain briefly what is meant by national treatment and non-discrimination.   

(b)      Tariffs, a tax on the value of imports, and quotas, typically a restriction on the quantity of imports, are popular tools for restricting trade and protecting domestic industries. Why is a tariff generally preferable to a quota? (Hint: a microeconomic supply and demand diagram may help.)

INTERNATIONAL ECONOMICS The World Trade Organisation (WTO) is founded on the principles of national treatment and non-discrimination (a) Explain briefly what is meant by national treatment and non-discrimination (b) Tariffs, a tax on the value of imports, and quotas, typically a restriction on the quantity of imports, are popular tools for restricting trade and protecting domestic industries. Why is a tariff generally preferable to a quota? (Hint: a microeconomic supply and demand diagram may help.)

Solution

a) National treatment is a basic principle of GATT/WTO that prohibits discrimination between imported and domestically produced goods with respect to internal taxation or other government regulation

b) Tariffs are preferred over Quotas because of following reasons:

1. Tariffs generate revenue.

2. Quotas might promote corruption.

3. Quotas might encourage smuggling.