# International Economics Study Set 9

## Quiz 10 :Pushing Exports

You have been asked to propose a specific revision of U.S. antidumping policy, to make the policy more likely to contribute to U.S. well-being. What will you propose
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Essay

The objectives of the revision should be make antidumping policy contribute to U. S. national well-being. The policy should be targeted toward predatory dumping and aggressive cyclical dumping. It should take into account domestic consumer interests as well as domestic producer interests. It generally should not impose antidumping duties on persistent dumping that involves international price discrimination in favor of U.S. buyers. The specific provisions could include the following. First, the definition of dumping should be changed. Dumping should be defined as pricing an export below the average variable cost (or marginal cost) of production. This change will permit the definition of dumping to be focused on overly aggressive pricing that is often characteristic of predatory dumping or aggressive cyclical dumping. Second, the test for injury should include consideration of benefits to domestic consumers from low-priced imports, in addition to harm to domestic producers. The injury test should be a test of effect on net national well-being. Alternatively, a radical change would be to abolish the law and substitute use of safeguard policy. Another radical alternative is to abolish the antidumping law, and instead focus on prosecuting any predatory dumping using U.S. antitrust laws that prohibit monopolization.

What is a countervailing duty
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Essay

A countervailing duty is a tariff imposed to offset the amount by which a foreign government subsidizes its exports to the country imposing the duty.

Consider the case of an export subsidy for an importing country that has some monop­sony power-that is, the case in which the foreign supply-of-exports curve is upward-sloping. Use a graph like that in Figure 11.4. a. In comparison with free trade, what is the effect of the export subsidy on the inter­national price and the quantity traded b. The importing country now imposes a countervailing duty that returns the market to the initial free-trade quantity traded. In comparison with the market with just the export subsidy, explain why the countervailing duty is good for the world. Explain why the countervailing duty can also increase the well-being of the importing country.
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Consider the export subsidy shown in Figure 11.3. Assuming that the export subsidy remains $20, what are the effects of a decline in the world price from$100 to \$90 Show the effects using a graph and explain them. FIGURE 11.7 A Two-Firm Rivalry Game with No Government Subsidies: Airbus versus Boeing