Arguments for Free Trade: - PowerPoint PPT Presentation

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Arguments for Free Trade:

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2) Brander and Spencer argument on how tariffs can extract profits ... 8) Environmental protection - tuna or bht example. 9) Political argument - Cuba or Iraq ... – PowerPoint PPT presentation

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Title: Arguments for Free Trade:


1
Arguments for Free Trade 1) Comparative
advantage 2) Consumer welfare 3) Break up
domestic monopolies with international
competition Arguments for Protection 1) Optimal
tariff 2) Brander and Spencer argument on how
tariffs can extract profits from monopoly foreign
sellers 3) Krugman argument on export subsidy 4)
infant industry argument 5) national security -
Defense 6) Diversification - Bolivia and tin 7)
govt. revenue (LDCs) 8) Environmental protection
- tuna or bht example 9) Political argument -
Cuba or Iraq
2
P
Consumer surplus lost
PT
Tariff revenue earned
PM
MC tariff
MC1
Demand
Which is greater? Welfare increases If Govt.
revenue from Tariff gt ?CS
MR
Q
QT
QM
Tariff extracted from a monopolist foreign
exporter (Brander and Spender, 1981)
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