1 Lecture 8 US Trade Policies and Institutions Econ 340 Lecture 8: US 2 Outline: US Trade Policies and Institutions • Parts of the US Government that Handle Trade • Main Features of US Trade Policies – Tariffs, Quotas, VERs – Escape Clause – Unfair Trade Laws – Trade Adjustment Assistance – Fast Track – GSP • Dumping and Anti-Dumping • Why the US Protects • Trends in US Trade Policy • International Organizations Lecture 8: US 3 US Trade Institutions • US does NOT have a “ministry” or “department” of international trade • Most other countries do; e.g. … – Canada: Department of International Trade – Japan: Ministry of Economy, Trade and Industry (METI) (Used to be MITI) – EU: Directorate General Trade • Trade Commissioner: Jean-Luc Demarty since Jan 20112 Lecture 8: US 4 US Trade Institutions • In US, responsibility for trade issues is spread over many entities – Congress – USTR – Commerce Department – US International Trade Commission – Export-Import Bank – and several others • Obama said several years ago that he seeks to consolidate many of these in a single agency – Not mentioned since then Lecture 8: US 5 US Trade Institutions • USTR = United States Trade Representative – Handles negotiations on trade issues with • Other governments • WTO – Drafts trade legislation for Congress – Does NOT set or implement trade policies Lecture 8: US 6 US Trade Institutions • The current USTR is former Michael Froman • Cabinet-level official of US government3 Lecture 8: US 7 US Trade Institutions • Congress – Sets tariffs and other trade policies (thus approves trade agreements) – Two committees are responsible • House: Ways and Means • Senate: Finance – Why these? Because trade policy was originally about collecting revenue Lecture 8: US 8 US Trade Institutions • Administrative Agencies – ITA = International Trade Administration • Part of Department of Commerce • Main Function: Determines “fairness” in unfair trade cases – Are imports “dumped”? – Are they “subsidized”? • Orientation of ITA: very much favors US businesses Lecture 8: US 9 US Trade Institutions • Administrative Agencies – ITC = USITC = United States International Trade Commission • Independent agency – Commissioners (6) are nominated by President and confirmed by Senate – After that they are on their own • Main Function: To determine “injury” in cases of – Anti-Dumping – Countervailing duties (subsidies) – Safeguards (a.k.a., Escape Clause)4 Lecture 8: US 10 Outline: US Trade Policies and Institutions • Parts of the US Government that Handle Trade • Main Features of US Trade Policies – Tariffs, Quotas, VERs – Escape Clause – Unfair Trade Laws – Trade Adjustment Assistance – Fast Track – GSP • Dumping and Anti-Dumping • Why the US Protects • Trends in US Trade Policy • International Organizations Lecture 8: US 11 Main Features of US Trade Policies • Tariffs, quotas, etc. – We have them – Average US tariff is about as low as any major country – We still have high tariffs on some products • Textiles, apparel • Agriculture – Quotas are still common in agriculture – VERs: no longer Lecture 8: US 12 Main Features of US Trade Policies • US tariff history: 1810-1920 Today5 Lecture 8: US 13 Main Features of US Trade Policies • US tariff history: 1865-1960 Today Today Average tariff 14 Main Features of US Trade Policies • US tariff history: 1865-1960 – Why the decline? Partly due to revenues from income tax: Lecture 8: US 15 Main Features of US Trade Policies • US tariff history: 1865-1960 Today Today Average tariff Trade Restrictiveness (2 measures)6 • Aside on “Trade Restrictiveness Index” (TRI) – Defined as the level of a uniform ad valorem tariff that would have the same overall effects as the actual tariff structure – Why TRI > Average Tariff • Tariffs are very unequal across products • Recall that dead-weight-loss rises with square of tariff • E.g.: Tariffs (0, 20) will cause twice the loss of (10, 10) Lecture 8: US 16 Main Features of US Trade Policies Lecture 8: US 17 Outline: US Trade Policies and Institutions • Parts of the US Government that Handle Trade • Main Features of US Trade Policies – Tariffs, Quotas, VERs – Escape Clause – Unfair Trade Laws – Trade Adjustment Assistance – Fast Track – GSP • Dumping and Anti-Dumping • Why the US Protects • Trends in US Trade Policy • International Organizations Lecture 8: US 18 Main Features of US Trade Policies • Escape Clause = Section 201 – Called “Safeguards” in WTO – Permits temporary protection from injurious imports • Does NOT allege that the imports are “unfair” – Eligibility is decided by USITC alone • Injury (must be serious) • Causation (must be due to imports) – Implemented by President, who may say NO.7 Lecture 8: US 19 Main Features of US Trade Policies • Escape Clause – Important recent case: Steel • Bush Administration imposed safeguard tariffs on imported steel in March 2002 for 3 years • Other countries filed case against US in WTO • WTO ruled against US (import surge had abated well before we imposed tariffs) • US removed tariffs in December 2003 Lecture 8: US 20 Main Features of US Trade Policies • Escape Clause – Important recent case: Tires • Obama Administration imposed safeguards tariffs on imported tires from China in September 2009: 35% 1st yr, 30% 2nd yr, 25% 3rd yr • Reason: imports had tripled over 5 yrs; 5000 jobs lost • Requested by union, not by firms. Firms are themselves producing in China. • Obama had option of saying No Lecture 8: US 21 Outline: US Trade Policies and Institutions • Parts of the US Government that Handle Trade • Main Features of US Trade Policies – Tariffs, Quotas, VERs – Escape Clause – Unfair Trade Laws – Trade Adjustment Assistance – Fast Track – GSP • Dumping and Anti-Dumping • Why the US
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