EC4333 Lecture 3 Trade Tariffs, and Welfare

Lecture Plan - Trade Tariffs and Welfare

Estimated time - 1.30 minutes

Aims

To look at examples of the effects of trade creation/diversion

To explore the similarities of import quotas and restrictive licensing

to derive appropriate policy steps from this analysis

to show how the analysis in terms of macro institutions like the GATT and the WTO.

Learning objectives

Students should understand what a tariff and a deadweight loss is, be able to compute the 'before and after' effects of each type of tariff and quota imposition, and be able to argue for and against a policy on the grounds of free trade theory.

Introduction

Last week we saw the differences between trade creation, trade destruction, and the welfare effects of both. We finished the history of the EU, showed some data, and did some institutional analysis with our friend Beach.

This week we'll look at the effects of tariffs, import quotas, and restrictive licensing, and derive some interesting and unexpected results from the analysis.

Further reading

• El-Agraa, A.M., The European Union: Economics and Policies, 6th ed., pgs 1-19 and 72-79,

337.142 AGR.

• McDonald, F. and Dearden, S. European Economic Integration, 3rd ed., pgs 34-53, 337.142 MCD

Watch the slideshow below, or click on the 'slideshare' icon in the bottom left hand corner to download it.

Download the handout by right clicking the image below:

Ec4333 Lecture4 Handout Numbers-1

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About Stephen Kinsella

I teach economics at the <A HREF="http://www.ul.ie/">University of Limerick</A>, where I am a Junior Lecturer in the <A HREF="http://www.ul.ie/business/departments/ec/economics.shtml">Kemmy Business School</A>. This site is primarily for students at UL. You can <a href="mailto:stephen.kinsella@ul.ie">email me</a> if you have any questions.