Jim Whitney | Economics 131 |
Economic criteria:
1. Is there a market failure? No:
dismiss complaint. Yes: proceed to question 2
2. What is the market failure specifically related
to?
2.1: Domestic
production: implement a production remedy, such as a production tax or
subsidy
2.2: Domestic
consumption: implement a consumption remedy, such as a consumption tax
or subsidy
2.3: Trade:
implement a trade remedy, such as a trade-market tax, subsidy or quota.
Legal criteria (per U.S. law):
1. Safeguard provision: (Section
201 of Trade Act of 1974): provides an "escape clause" from trade concessions
resulting in "fair but injurious" competition, as indicated by (1) rising
import volume or share; (2) domestic production "seriously injured or threatened";
and (3) imports "a cause which is important and not less than any other
cause."
2. Dumping (Title VII of Tariff
Act of 1930): U.S. antidumping law provides protection against imports
selling at "less than fair value (LTFV)," where fair value means either
(1) the price or (2) the average total cost of production of the item--in
the country of origin. LTFV imports must cause "material injury" to justify
a remedy of anti-dumping duties.
4. Foreign subsidies (Title
VII of Tariff Act of 1930): The countervailing duties law provides for
the levying of special additional duties to offset foreign subsidies on
products imported into the United States. Subsidized imports must cause
"material injury" to justify a remedy of countervailing duties.
4. "Unfair trade practices" (Section
301 of Trade Act of 1974): Section 301 covers a wide range of "unfair trade
practices," typically with the goal of trying to expand export opportunities
for the U.S. A finding of unfair trade practices may result in a remedy
of retaliation.
5. Patent or trademark infringement (Section
337 of Tariff Act of 1930): Intellectual property is protected by declaring
illegal any imports of items which infringe a valid U.S. patent, trademark,
or copyright. The remedy is an import ban.
6. National security (Section
232 of Trade Expansion Act of 1962): restricts imports of products which
are deemed to threaten U.S. national security.
7. Political and social objectives (various
statutes): human rights, environmental protection, etc. Remedy: economic
sanctions, including trade restrictions.
International agreement provisions (World Trade Organization)
1. Quantitative restrictions:
(1) Multi-Fiber Arrangement to be phased out over 10 years
(2) Other VERs to be phased out within 4 years of start of World Trade
Organization
2. Subsidies: 3 categories:
(1) prohibited subsidies (export; domestic content)
(2) actionable subsidies ("demonstrably adverse effects")
(3) nonactionable (R&D; disadvantaged regions; environmental controls)
3. Technical barriers: cannot
"create unnecessary barriers to trade"; individual standards acceptable
to protect the environment and human, animal or plant life
4. Government procurement: unresolved;
to be extended to services and subordinate levels of government
5. Antidumping provisions: unresolved; rules
clarified and elaborated
6. Extension of coverage:
(1) Agriculture: QRs to be
replaced with tariffs and then cut by avg. of 36%; volume of subisdized
exports to be reduced by 21%; transitional food aid and agricultural support
for LDC food importers
(2) Services: nondiscrimination
and most-favored nation (with exemptions in financial services) principles
to be applied; unresolved for telecommunications, audiovisual and maritime
services
(3) Intellectual property: nondiscrimination;
minimum standards and increased enforcement
(4) Foreign investment: local
content and foreign exchange provisions banned