Tài liệu Microeconomics for MBAs 58 ppt

Japan can produce one unit of textiles and trade it for two units of beef, gaining one textile unit in the process.. One unit of textiles costs Japan one unit of beef; the same unit of t

itself It can produce three units of beef, trade two of them for a textile unit, and have one extra beef unit left over—or it can trade all three units of beef for one and one-half units

of textiles Japan can produce one unit of textiles and trade it for two units of beef,

gaining one textile unit in the process

Both nations can gain from such a trade because each is specializing in the

production of a good for which it has a comparative opportunity cost advantage.2 Even

though the United States has an absolute cost advantage in both products, Japan has a

comparative advantage in textiles One unit of textiles costs Japan one unit of beef; the

same unit of textiles costs the United States three units of beef Similarly, the United

States has a comparative cost advantage in the production of beef One unit of beef costs the United States only one-third unit of textiles; it costs Japan a whole unit If each

country specializes in the commodities for which it has a comparative cost advantage, the two nations can save resources for use in further production

TABLE 17.2 Mutual Gains from Trade in Beef and Textiles, United States and Japan

United States Japan

Total, U.S and Japan Production and

consumption

levels before international

trade

15 textiles

45 beef

3 textiles

22 beef

18 textiles

67 beef

Production levels in

anticipation of

international trade

(complete specialization

assumed)

0 textiles

90 beef

25 textiles

0 beef

25 textiles

90 beef

At an exchange ratio of 2 beef for 1 textile, United States and Japan

agree to trade 40 beef for 20 textiles

Consumption levels after

international trade

20 textiles

50 beef

5 textiles

40 beef

25 textiles

90 beef

Increased consumption

(before-trade consumption

levels subtracted)

5 textiles

5 beef

2 textiles

18 beef

7 textiles

23 beef

Table 17.2 shows the gains in production each nation can realize under such an

arrangement Before trade, the United States produces 15 units of textiles and 45 of beef; Japan produces 3 units of textiles and 22 of beef Total production is therefore 18 units

of textiles and 67 units of beef With trade, the United States produces 90 units of beef

2

Specialization in production for the United States and Japan will likely be partial with increasing

marginal production costs With constant-cost or decreasing-cost, the specialization of production may be complete

and Japan produces 25 units of textiles At an international trade ratio of 1 unit of textiles

to 2 units of beef, suppose the two nations agree to trade 40 units of beef for 20 units of

textiles The United States gets more beef—50 units as opposed to 45—and more

textiles—20 units as opposed to 15 Japan also gets more of both commodities

Through specialization, total world production has risen from 18 to 25 units of textiles

and from 67 to 90 units of beef Both nations can now consume more of both

commodities In a very important sense, the world’s aggregate real income has increased

The same gain in aggregate welfare is shown graphically in Figure 17.1 On the

left side of the figure, the U.S production possibilities curve extends from 30 units of

textiles on the horizontal axis to 90 units of beef on the vertical axis Japan’s production

capability is shown on the right Without trade, the United States chooses to produce at

point a, 15 textiles units and 45 beef units At an exchange ratio of 2 beef units for one

textile unit, the United States can move up and to the left on its production possibilities

curve At the extreme, it will produce at point b, 90 units of beef and no textiles It can

trade along the outer line, exchanging 40 beef units for 20 textile units (point c) Through

trade, the United States realizes a gain in aggregate welfare represented by the distance

FIGURE 17.1 Production Gains from International Trade

The United States can produce any combination of beef and textiles along its production possibilities curve

B1T1 (left panel) Without trade, it will choose to produce at point a, 45 units of beef and 15 units of textiles

If given the opportunity to trade two units of beef for one unit of textiles, however, the United States will

specialize completely in beef (point b) and trade beef for textiles along the darkened line Through trade, the United States moves from a to c, exporting 40 units of beef (90 units produced minus 50 consumed) and

importing 20 units of textiles In the process the nation increases its consumption of both beef and textiles, from 45 units of beef and 15 units of textiles to 50 units of beef and 20 units of textiles (the darkened line does not intersect the horizontal beef axis because the United States cannot get more than 25 units of textiles from Japan.) At the same time trade permits Japan (right panel) to shift its consumption from the black

production possibilities curve to the darkened curve By producing at b1 and exporting 20 units of textiles in

exchange for 40 units of beef, Japan too can expand its consumption, from a1 to c1

between points a and c In other words, international trade permits the United States to

consume at a point beyond its own limited production possibilities curve (the black line

in the graph) In the same way, Japan realizes a gain in welfare equal to the difference

between its consumption before trade, a1, and its consumption after trade, c1

In the long run, a country’s imports are paid for by its exports Thus, by engaging

in international trade, according to comparative advantage, a country gains by reducing

its social opportunity cost The social opportunity cost of imports is the exports required

to pay for the imports If the resources used to produce exports are less than those

required to produce the goods domestically, there is a net social economic gain

The Distributional Effects of Trade

As we have seen, even a nation that has an absolute advantage in every production

process can benefit from trade In reality, no such nation exists, but that just underscores the point that even in the unlikeliest of conditions, we can make the case for free trade

Furthermore, if voluntary trade takes place we must assume that both parties perceive that they will gain Why else would they agree to the arrangement? How much each nation

gains depends on the terms of trade —the ratio at which one commodity can be traded or

exchanged for another commodity internationally; or on an aggregate basis, it is the ratio

of the price of exports to the price of imports The more favorable a nation’s terms of

trade, and therefore its exchange rate, the larger its share of gain in enhanced output

International trade remains a controversial subject, for although nations gain from trade, individuals within those nations may not Individual gains tend to go to the firms

that produce goods and services for export, losses tend to go to the firms that produce

goods and services that are imported under free trade

Gains to Exporters

Exporters of domestic goods gain from international trade because the market for their

goods expands, increasing demand for their products The increase in their revenue can

be seen in Figure 17.2 When the demand curve shifts from D 1 to D2, producers’

revenues rise from P1 Q2 (point a) to P2Q3 (point b) The more price-elastic or flatter the

supply function (S), the larger the change in quantity and the smaller the change in price

The increase in revenues is equal to the shaded L-shaped area P2 Q3Q2aP1 Producers benefit because they receive greater profits, equal to the shaded area above the supply

curve, P2 baP1 Workers and suppliers of raw materials benefit because their services are

in greater demand, and therefore more costly The cost of producing additional units for

export is equal to the shaded area below the supply curve, Q2 abQ3

This graph suggests why farmers supported the sales of wheat to the Soviet Union that began in the early 1970s They complained loudly when the U.S government

suspended sales temporarily for political reasons Many consumers and members of

Congress objected the wheat sales, however, on the grounds that they would increase the domestic price of wheat and therefore of bread In a narrow sense, consumers of

exported products have an interest in restricting their exportation Yet in the broad

context of international trade Restrictions can work against the private interests of

individuals, including even consumers of bread Trade is ultimately a two-way street To import goods and services that can be produced more cheaply abroad than at home, a

nation must export something else No nation will continually export part of what it

produces without getting something in return To the extent that exports are restricted to

suit the special interests of some group, imports of other commodities also are restricted Restrictions on the exportation of wheat may hold down the price of bread, but they can

also increase the price of imported goods, like radios and television sets

FIGURE 17.2 Gains from the Export Trade

The opening up of foreign markets to U.S

producers increases the demand for their products,

from D 1 to D2 As a result, domestic producers can

raise their price from P1 to P2 and sell a larger

quantity, Q3 instead of Q2 Revenues increase by

the shaded area P2bQ3Q2aP1 The more

price-elastic or flatter the supply function (S), the larger

the change in quantity and the smaller the change

in price

Losses to Firms Competing with Imports

While consumers gain from increased imports, domestic producers may lose from

increased competition Foreign producers can gain a foothold in the domestic market in

three ways: (1) by providing a better product than domestic firms; (2) by selling

essentially the same product as domestic firms, but at a lower price; and (3) by providing

a product previously unavailable in the domestic market Most people welcome the

importation of a previously unavailable product, but producers who face competition

from foreign suppliers have an incentive to object to importation If imports are allowed, the domestic supply of a good increases Domestic competitors will sell less, and they

may have to sell at a lower price In short, the employment opportunities and real income

of domestic producers decline as a result of foreign competition

Figure 17.3 shows the effects of importing foreign textiles Without imports,

demand is D and supply is S1 In a competitive market, producers will sell Q2 units at a

price of P2 Total receipts will beP2 x Q2 The importation of foreign textiles increases the supply to S2, dropping the price from P2 to P1 Because prices are lower, consumers increase their consumption from Q2 to Q3 and get more for their money The more

price-elastic or flatter the demand curve (D), the greater the change in quantity and the smaller

the change in price

FIGURE 17.3 Losses from Competition with

Imported Products

The opening up of the market to foreign trade

increases the supply of textiles from S 1 to S2 As a

result, the price of textiles falls from P2 to P1 , and

domestic producers sell a lower quantity, Q1

instead of Q2 Consumers benefit from the lower

price and the higher quantity of textiles they are

able to buy, but domestic producers, workers and

suppliers lose Producers’ revenues drop by an

amount equal to the shaded area P2abP1

Workers’ and suppliers’ payments drop by an

amount equal to the shaded area Q2 abQ1

Starting at point c, a tariff or tax equal to ad is

levied, shifting the supply curve from S 2, S1 In an

industry whose costs are increasing, the increase in

price from P1 to P2 in the importing country is less

than the increase in the tariff (ad), because a price

fall in the exporting country absorbs some of the

burden of the duty.

Domestic firms, their employees, and their suppliers lose Because the price is

lower, domestic producers must move down their supply curve (S1) to the lower quantity

Q1 Their revenues fall from P2Q2 to P1Q1 In other words, the revenues in the shaded

L-shaped area P2a Q2Q1bP1 are lost Of this total loss in revenues, owners of domestic

firms lose the area above the supply curve, P2 abP1 Workers and suppliers of raw

materials lose the area below the supply curve, Q2 abQ1 This is the cost domestic firms

would incur in increasing production from Q1 to Q2, the payments that would be made to domestic workers and suppliers in the absence of foreign competition If workers and

other resources are employed in textiles because it is their best possible employment, the introduction of foreign products can be seen as a restriction on some workers’

employment opportunities In summary, while international trade lowers import prices

and raises export prices in the domestic nation, the net impact is a reduced social

opportunity cost curve that expands total output and consumption opportunities

The Effects of Trade Restrictions

Such as Tariffs and Quotas

Because foreign competition hurts some individuals, domestic producers, workers, and

suppliers have an incentive to seek government restrictions on the imports of tradables

Of course, some industries such as communications, services, and utilities are largely

insulated from foreign competition without trade restrictions Two forms of protection

are commonly used, tariffs and quotas A tariff is a special tax or duty on imported

goods that can be a percentage of the price (ad valorem duty) or a specific amount per

unit of the product (specific duty) A tariff may be imposed to raise money for the

levying country—typically, revenues are modest on commodities not produced in the

levying country—or in the more likely case, to protect some industry against the cold

winds of competition A quota is a physical or dollar value limit—mandatory or

voluntary—on the amount of a good that can be imported or exported during some

specified period of time There are other nontariff barriers such as controlling the flow of foreign exchange, licensing requirements, health, quality, or safety restriction and

regulations on products

If tariffs are imposed on a foreign good such as textiles, the supply of textiles will

decrease—say, from S2 to S1 in Figure 17.3—and the price of imports will rise Domestic

producers will raise their prices too, and domestic production will go up If the tariff is

high and all foreign textiles are excluded, the supply will shift all the way back to S1 A

tariff will have a more modest effect, shifting the supply curve only part of the way back

toward S1 The price of textiles will rise and domestic producers will expand their

production, but imports will continue to come into the country How much the price rises and the quantity falls after the imposition of the tariff depends on how price-elastic or flat

the demand curve (D) is The more elastic D is, the greater the fall in quantity and the

greater the rise in price The imposition of a duty can cause the taxed good in the

importing country to increase by exactly the amount of the duty, less than the duty, or in

the extreme case, not at all (depending on price elasticity) In the most likely case (of

increasing cost conditions and a rising supply curve) a tariff will cause the price to

increase in the importing country by less than the amount of the duty as the price falls in

the foreign country The tariff will cause the domestic and foreign price to differ by

exactly the amount of the tariff, but the price increase in the importing country is equal to

the tariff minus fall in price in the exporting country Thus, in Figure 17.3, starting from

point c, the increase in the price in the importing country from P1 to P2 is less than the

tariff equal to ad, shifting the supply curve from S2 to S1 as part of the duty is shifted to

the exporting country where the price falls For instance, a tariff of $3 per unit may cause the import price to rise by $2 and the export price to fall by $1 with both nations

absorbing part of the burden of the tariff Who bears the biggest burden is a matter of

relative price elasticity, just as whether buyers or sellers bear the burden of a domestic

excise tax As always, the more inelastic the demand of the buyers and the more elastic

the supply of the sellers, the bigger burden of any tax—domestic (e.g., excise) or foreign

(e.g., an import duty)—that falls on the buyers

A quota has the same general effect as a tariff, although its price-cost effect can

be much more drastic They both reduce the market supply, raise the market price, a

encourage domestic production, thereby helping domestic producers and harming

domestic consumers A quota, however, can sever international price-cost links because the market mechanism for relating the prices of different nations is artificially stopped

from functioning Nonetheless, quotas are sometimes imposed by nations because they

are a more certain and precise technique of control, and can be changed by administrative decree

There are three main differences between quotas and tariffs First quotas firmly

restrict the amount of a product that can be imported, regardless of market conditions A quota may specify how much oil may be imported each day or how much sugar may be

imported each year Tariffs, on the other hand, permit any level of importation for which

consumers are willing to pay Thus, if demand for the product increases, imports may

rise (There is a hybrid called a “tariff quota” that sets a fixed limit on importation or

exportation.)

The first Reagan administration imposed quotas on steel, copper, textiles, and

autos from Japan In 1984 the so-called voluntary restraint program forced Japan to

restrict auto sales in the United States to 1.84 million cars Foreign cars now represent

about 25 percent of U.S sales Because Japanese supply was not allowed to keep pace with the rapidly expanding U.S demand, the price of Japanese cars rose, more expensive models were imported, and consumers faced longer waiting lists for Japanese cars The

price of American cars also rose These consequences led to the termination of the

voluntary restraint program in 1985

The second major difference between tariffs and quotas is that quotas are typically specified for each important foreign producer Otherwise, all foreign producers would

rush to sell their goods before the quota was reached When quotas are rationed in this

way, more detailed government enforcement is required Tariffs place no such

restrictions on individual producers Moreover, the tariff is collected by the government

in custom duties while price enhancement with a quota goes as a windfall gain to the

fortunate few with import licenses

Finally, quotas enable foreign firms to raise their prices and extract more income

from consumers One economist estimated that the Reagan administration’s voluntary

restraint program permitted Japanese auto producers to raise their prices high enough to

take an additional $2,500 per car, or $5 billion, out of the American market.3 As a result

of the protectionist shield, U.S automakers raised domestic car prices $1,000 per car, or

$8 billion per year, in 1984 and 1985 Tariffs, on the other hand, force foreign firms to

lower their prices to offset the increase from the tariff They also generate income for the federal government Although tariffs and quotas promote a less efficient allocation of the

world’s scarce resources, because of the private benefits to be gained from tariffs and

quota, we should expect an industry to seek them as long as their market benefits exceed their political cost Politicians are likely to expect votes and campaign contributions in

return for tariff legislation that generates highly visible benefits to special interests

Producers (and labor) will usually make the necessary contributions, because the

elimination of foreign competition promises increased revenues in the protected

industries The difference between the increase in profits due to import restrictions and

the amount spent on political activity can be seen as a kind of profit in itself

Surprisingly, protectionism may sometimes also be supported by exporters, as a tariff or

quota can stimulate net exports Since protectionism also causes the exchange rate to

appreciate, however, this discourages exports and offsets partially or wholly the

tariff-driven increase in net exports

Consumers, on the other hand, have reason to oppose tariffs or quotas on

imported products Such legislation inevitably causes prices to rise, as a tariff amounts to

a subsidy to the domestic producer of the dutiable product, paid for largely by the

consumers of that product in the form of higher prices Consumers typically do not offer

3

Robert Crandell, “Assessing the Impact of the Automobile Export Restraints upon U.S Automobile Prices,” mimeo, Brookings Institution, December 1985

very much resistance, however, because the effects of tariffs and quotas are hard to

perceive Unlike a sales tax, the cost of a tariff is not rung up separately at the cash

register, and many consumers do not reason through the complex effects of a tariff on

consumer prices In fact, many if not most, consumers feel that tariffs on foreign

automobile, steel, or copper producers are good for the nation and for themselves “Buy American’’ slogans and advertisements emphasizing the need to preserve American jobs are generally effective in swaying public opinion One comprehensive investigation

showed that protection in thirty-one countries cost consumers $53 billion in 1984, while

providing only $40 billion in benefits to the producers.4

As a group, consumers have less incentive to oppose tariffs than industry has to

support them, as the costs to individual consumers and taxpayers are negligible and

largely hidden The benefits of a tariff accrue principally to a relatively small group of

firms, whose lobby may already be well entrenched in Washington These firms have a

strong incentive to be fully informed on the issue and to make campaign contributions,

but the harmful effects of a tariff are diffused over an extremely large group of

consumers The financial burden any one consumer bears may be very slight,

particularly if the tariff in question is small, as most tariffs are As result, the individual

consumer has little incentive to become informed on tariff legislation or to make political

contributions to lobbies that support such legislation Although consumers as a whole

may share an interest in opposing tariffs, collective action must still be undertaken by

individuals—and individuals will not incur the cost of organizing unless they expect to

receive compensating private benefits

At some level of increased cost, of course, consumers will find the necessary

incentive to oppose tariff legislation For this reason Congress rarely passes tariffs high

enough to make importation totally unprofitable Even low tariffs reduce the nation’s

real income while redistributing it toward protected sectors The size of the pie is

reduced, but the protected few get a bigger slice In spite of all the impediments to free

trade imposed by U.S economy, there has been a substantial increased in our dollar

volume of imports and exports over the last thirty years Similarly, world trade has

increase in the last three decades Over 15 percent of the world’s production is now

consumed in a different nation than where it was produced Put differently, the dollar

value of imports to all countries has increased tenfold since 1960

According to Alan S Blinder,5 the case against protectionism, described as a

negative-sum game, where the losing consumers lose more than the winning protected

producers win, involves even more problems There are four other problems with trade

restrictions First, protectionism allows high-cost producers that would otherwise fail to

survive Second, trade restrictions have a habit of affecting other industries For

example, automobiles need protection because the ball bearings, steel, and textiles that

provide inputs to automobiles are protected Third, foreign nations often retaliate against protectionism Tit-for-tat is the modus operandi in international trade: Country A raises

barriers on product X because Country B did it to product Y Fourth, trade restrictions

4

Gary C Hufbauer, et al., Trade Protection in the United States: 31 Case Studies (Washington, D.C.:

Institute for International Economics 1986)

5

Alan Blinder, Hard Heads, Soft Hearts (Reading, Mass.: Addison-Wesley, 1987), pp 118-119

aren’t really job-saving or job-creating, but job-swapping Protectionism raises the

exchange rate, hurting exports in unprotected industries Because in the long run the

value of exports must be equal to the value of imports, we end up swapping jobs in

efficient unprotected industries

The Case for Free Trade

We have seen how international trade can on balance increase the total incomes of the

nations engaged in it, although export producers gain and import-substitute producers

lose By extension, we can conclude that anything that restricts the scope of trade

between nations generally reduces their real incomes To the extent that trade is a

two-way street—that exports trade for imports, at least in the long run—a reduction in imports brings a reduction in exports From our imports the Japanese get the dollars they need to buy American exports If we reduce our imports, they will have fewer funds with which

to buy from us For this reason, U.S farmers, who sell approximately one-third of their

crops in foreign markets, actively opposed the protectionist movement led by textiles,

steel, and copper firms in the 1980s

Yet what is true for one sector of the economy is not necessarily true for all If all sectors are protected by tariffs, it is possible (but not inevitable) that all experience a drop

in real income Figure 17.4 illustrates the case of an economy with two industries,

automobiles and textiles Both industries must compete with imports If neither seeks

protection, both will operate in cell I, at a combined real income of $50 ($20 for the

textiles industry and $30 for the automobile industry) If the textiles industry seeks

protection but the auto industry does not, they will move to cell II, where tariffs raise the

textiles industry’s income from $20 to $23 The automotive sector’s income falls to $25,

so that the two industries’ combined real income falls to $48 Consumers get fewer

textiles at a higher price

Similarly, if the auto industry seeks protection while the textiles industry does not, the economy will move from cell I to cell III Again, total real income falls from $50 to

$49, but this time the auto industry is better off Its income rises from $30 to $34, while

the textiles industry’s income falls to 15 Obviously, if one industry seeks protection, the

other has an incentive to follow suit If the textiles industry counters with a tariff of its

own, the economy will move from cell III to cell IV, and the industry’s real income will

rise from $15 to $17

Without some constraint on both sectors, then, each has an interest in seeking

protection regardless of what the other does Yet if the economy winds up in cell IV,

total real income will be lower than under any other conditions: only $43 Obviously the

best course for the economy as a whole is to prohibit tariffs altogether, and in an

economy with only two sectors, the cost of reaching an agreement is manageable In the real world, however, there are many economic sectors, and the costs of reaching a

decision are much greater

In Figure 17.4, both industries end up with lower real incomes in cell IV, but in

reality, the effects of multiple tariffs will be different in different sectors of the economy

Although total real income will fall, several sectors may realize individual gains

Consider Figure 17.5 Although total real income falls from cell I ($50) to cell IV ($48), the auto sector’s income rises (from $30 to $31) In this case the textile sector bears the brunt of tariff protection, and the auto sector has a compelling interest in obtaining

protective tariffs The sectors of the economy that are most adept at manipulating the

political process will be the least willing to accept free trade

Although it is true that for a nation some trade is better than no trade, it is not

necessarily true that free trade is better than restricted trade Even though protectionism

promotes economic inefficiency in the aggregate, a nation may under certain conditions

act like a monopolist and improve its share of the gains through trade restrictions

Similarly, the owners of relatively scarce factors of production may be better off with

little or no trade

FIGURE 17.4 Effects of Tariff Protection on Individual Industries: Case 1

If neither the textiles nor the automobiles industry obtains tariff protection, the economy will earn its highest possible collective income (cell I), but each industry has an incentive to obtain tariff protection for itself If the textiles industry alone seeks protection (cell II), its income will rise while the auto industry’s income falls If the auto industry alone seeks protection, its income will rise while the incomes of textiles income industry falls If both obtain protection, the economy will end up in cell IV, its worst possible position Income in both sectors will fall