IPE_5
1. Structure of the Lecture
The course is divided into key areas:
● Introduction to International Trade: Covers basic principles and theories.
● Trade Policy Instruments: Focus on tariff and non-tariff barriers and export
promotion strategies.
● Trade Policies and Preferences: Examines the role of trade policies in shaping
international trade.
● Forms of Trade Liberalization: Discusses the impact of WTO membership and
Regional Trade Agreements (RTAs) on trade.
2. Export Promotion
Export promotion refers to government activities that stimulate firms’ exports. Policies
include:
● Export Subsidies: Payments to exporters that result in price distortions. The
domestic price rises while the importing country's price falls, leading to a net
welfare loss (b + d + e + f + g).
● Export Credit Guarantees and Promotion Programs: Encourage export growth.
The document uses the European Union's (EU) Common Agricultural Policy (CAP) as a
case study, highlighting:
● Overproduction issues and reliance on subsidies to dispose of excess goods.
● The substantial costs to taxpayers (€59 billion in 2013).
● WTO disciplines on subsidies and recent reforms to limit export subsidies.
3. The Gravity Model of Trade
This model explains trade volume between countries based on:
● Economic Size: Larger economies produce and trade more.
● Distance: Trade costs increase with distance, reducing volume.
Key points include:
● Regression models estimate trade determinants, showing that a 1% increase in
distance reduces trade by 0.7%-1%.
● Other determinants: cultural ties, geographical features, borders, and RTAs.
4. WTO and Subsidies
The World Trade Organization (WTO) disciplines the use of subsidies:
● The Agreement on Subsidies and Countervailing Duties (1994) prohibits export
subsidies in developed countries.
● WTO reforms aim to phase out agricultural export subsidies, benefiting
developing nations.
China’s non-market economy status creates challenges in WTO dispute settlements. The
case of China's status post-2016 is discussed, reflecting tensions between WTO members.
5. Additional Insights
1. Structure of the Lecture
The course is divided into key areas:
● Introduction to International Trade: Covers basic principles and theories.
● Trade Policy Instruments: Focus on tariff and non-tariff barriers and export
promotion strategies.
● Trade Policies and Preferences: Examines the role of trade policies in shaping
international trade.
● Forms of Trade Liberalization: Discusses the impact of WTO membership and
Regional Trade Agreements (RTAs) on trade.
2. Export Promotion
Export promotion refers to government activities that stimulate firms’ exports. Policies
include:
● Export Subsidies: Payments to exporters that result in price distortions. The
domestic price rises while the importing country's price falls, leading to a net
welfare loss (b + d + e + f + g).
● Export Credit Guarantees and Promotion Programs: Encourage export growth.
The document uses the European Union's (EU) Common Agricultural Policy (CAP) as a
case study, highlighting:
● Overproduction issues and reliance on subsidies to dispose of excess goods.
● The substantial costs to taxpayers (€59 billion in 2013).
● WTO disciplines on subsidies and recent reforms to limit export subsidies.
3. The Gravity Model of Trade
This model explains trade volume between countries based on:
● Economic Size: Larger economies produce and trade more.
● Distance: Trade costs increase with distance, reducing volume.
Key points include:
● Regression models estimate trade determinants, showing that a 1% increase in
distance reduces trade by 0.7%-1%.
● Other determinants: cultural ties, geographical features, borders, and RTAs.
4. WTO and Subsidies
The World Trade Organization (WTO) disciplines the use of subsidies:
● The Agreement on Subsidies and Countervailing Duties (1994) prohibits export
subsidies in developed countries.
● WTO reforms aim to phase out agricultural export subsidies, benefiting
developing nations.
China’s non-market economy status creates challenges in WTO dispute settlements. The
case of China's status post-2016 is discussed, reflecting tensions between WTO members.
5. Additional Insights
