单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,*,CHAPTER,7 EXPORT PROMOTION AND OTHER POLICIES,Export Subsidy and Production Subsidy,Other Export Promotion Policies,Export Restrictions and Import Promotion,Policies,Trade Sanctions,1.Export subsidy and its effects,A payment by the government to encourage the export of specified,products.,(1)Direct export subsidy and indirct export subsidy,Direct export subsidy:price subsidy and income subsidy,Price subsidy,:,(i)Payment made against,the export value or quantum,.,(ii)Payment for the,difference,between the,domestic,price,and the,international market price,of an export.,Income subsidy,:,Payment for export losses.,1 Export Subsidy and Production Subsidy,Indirect subsidy,is intended to encourage a nations exports by reducing the price paid by,foreigners.,Special tax exemptions,such as,export tax rebate,and the provision of capital at favored,rates,etc.,Since 1985,China has adopted tax rebates for exporting enterprises.,The central government pays back a certain proportion of the,consumption,taxes and value added tax(VAT),to the enterprises after they pay taxes,for exported goods,In 1994,China established the,Export-Import Bank of China,(,China Eximbank,),to provide,export sellers credit,(to Chinese exporters)and,export buyers credit,(to foreign importers)at rates lower than commercial rates.,(2)The effects of an export subsidy,0,D,2,D,1,S,1,S,2,Q,X,2,S,a b c d,X,1,D,P,P,w,+s,P,w,s,Firms receives a S payment,per unit if they export.,Domestic suppliers has an,incentive to export.,Figure 7-2 Effects of an export subsidy in a,small country,They will sell to the home,market only if the,home,price,equals,P,w,+s,.,RESULT:,reduces the quantity sold in domestic market home,increases,domestic market price to,P,w,+s,increases producers supply,leading to,increased exports,X,2,.,0 D,2,D,1,S,1,S,2,P,P,W,+s P,W,P,W,S,D,a b c d,h e f g,Figure 7-2 Effects of an export subsidy in a,large country,With a subsidy being,in place in a,large,country,world price,drops,to,P,W,.,The domestic supplier,has an incentive to,export.They will not,sell to the home,market unless the,home price equals,P,w,+s,.,s,X,2,X,1,The actual deadweight loss of the large country is,greater than that of the small country.,2.Production subsidy and its effect,A payment made by a government to firms in a particular industry based on the,output,or,production,.,P,P,w,+s,P,w,0 D,1,S,1,S,2,Q,Figure 7-3 Effects of a production subsidy in,a,small country,a b c d,S,D,X,2,X,1,S,When a production,subsidy“s is in,place in a small,country,the world,price is not impacted.,The consumer,surplus does not,change.The producer,surplus is increased,by(a+b+c)and,government subsidy,is(a+b+c+d).The,whole welfare effect,is a deadweight loss,of(d).,From the perspective of the whole social,welfare,production subsidy is better than,export subsidy(d b+d),but more,government expenditure.,2 Other Export Promotion Policies,Devaluation of home currency,An official lowering of the value of a countrys currency.,e.g.From USD100=RMB680 to,USD100=RMB780,A stronger home currency would make home exports more expensive in other countries,and it would reduce the cost of home imports.,Two conditions:,(1)The goods exported has,big export price elasticity,;,(2)Trading partners do,not retaliate,.,2.Commodity dumping,Sporadic dumping:,A firm sells a,temporary surplus,of its production at whatever price it is able to get(i.e.possibly below the production cost).,Predatory dumping:,A firm sells at low price in order,to eliminate competition,and eventually to reap monopolist profits.,(3)Persistent dumping:,A,firm who enjoys,domestic monopolistic power,exploits the possibility of price discrimination between domestic and foreign markets in order to maximize profits.,A domestic monopolist sells in foreign markets that are highly competitive.,The home demand is less elastic than the foreign demand.,It would benefit from international price,discrimination,charging,a higher price at home,where competition is weak and demand is less,elastic,and,a lower price,for the same product,in foreign markets,to meet competition,.,P,60,18,0 100 Q,MR D,MC=MR=18,The market,in Japan,P,25,18,0 150 Q,MR D,MC=MR=18,The market,in the USA,Figure 7-4 Persistent dumping,The Japanese producer of telephones is a monopolist who uses price discrimination to maximize profits in the two markets.,3.Bonded,(customs),warehouse,The warehouses that are established upon approval of the customs for exclusive keeping of bonded goods and other goods that have,not gone through customs clearance,.,Advantages:it,frees up cash flow for importers,.,In China,the goods stored in a bonded warehouse,no substantial processing,may go through.,4.Special trade zone,(export processing zones and special economic areas,),An,area,where foreign goods may be,held or processed,and then,re-exported,without incurring duties.,The international firm can therefore import merchandise;store it in the special trade zone;and process,alter