International Trade
Theory and Policy
School of Economics,Yunnan University
Zhang Jianhua and Zhang Lin
Chap,1 Introduction
? One,Course Outline
? Basic theory in Economics ( Analysis of commodity and
factor mobility in open Macro economy by tools
Microeconomics
? Contents:
1,Pure Theory in International Trade ( Reason and Influence of
International Trade)
2,Policy of International Trade （ Policies aiming at limiting
imports while encouraging exports）
3,Institutions for International Trade（ WTO Institutions ）
Two Basic Concepts
? balance of trade
1,Trade Surplus（ Exports＞ Imports,Favorable Balance of
Trade）
2,Trade Deficit （ Exports＜ Imports,Unfavorable Balance
of Trade）
3,Trade Balance （ Exports ＝ Imports）
? Trade Structure
1,Commodity Structure
2,Geographical Structure
? Dependency of Trade
2004,2005年
中国的贸易收支
2004年中国对外贸易依存度
接近 70%
2005年中国主要进出口商品
Chap,3 Comparative Cost and
Classical Trade Theorem
? In this chapter,we introduce theorem of international trade,
We start such introduction looking at causes of
international trade and its influences in the economy ( in
Chap 3,4,5 and 6),then we will analyze the influences of
economics in trade,
One,Theory of Absolute Cost
Theory of absolute cost
It is a theoretical explanation to the cause of international
trade
Introduced by Adam Smith in his ― Wealth of Nations‖
Graph of Absolute Cost
Unit Cost Calculated in terms of labor
UK Portugal
Carpet
Wine
4
8
6
3
Each country produces
goods absolutely low in
cost,in exchange for
other countries’ goods
absolutely low in cost
Trade based
on division
of l a b o r
Reason of trade is because of
differences in absolute cost
Could
countries
have
trade
without
absolute
difference
s in cost?
Chap 3,2,Comparative Cost
? David Ricardo,1817
? Background
谷
物
法
Cultivation of wheat expands,
land of grass shrinks,and
price of wool goes up小
麦
价
格
上
涨
Labor is more expansive
Food expend increases,end
goods expend decreases
Revenge from other countries,
export of end products
decrease
损
害
了
资
产
阶
级
的
利
益
要
求
自
由
贸
易
Case of Ricardian Model
Unit Cost Calculated in terms of labor
Britain Portugal
Carpet
Wine
4
8
6
10
Assumptions：
Two nations,two products,one factor,fixed productivity,sufficient
employment,perfect competition,non-mobility of factor,barter,no
technological improvement,no transportation cost
The absolute costs of both products in Britain is lower than
that in Portugal,why is there still trade between these two
countries
A necessary condition of international
trade,Comparative cost difference
A sufficient condition of international trade,
international exchange rate is between
domestic exchange rates in both countries.
There is benefit
from trade
Limitation,Why there is
comparative cost？
Chap3,3,Classical trade model
based on comparative cost
Used to explain,Reasons and influences of trade ( Price,
Production,Consumption and Welfare,
1,Analysis Tools
1) Production
Possibility Curve
The maximum
production when
factors are fully
employed,
A（ 0,100）
B（ 100,0）
O X
Y
C（ X1,Y1）
Property of Production Possibility Curve
Slope of PPC is equal to marginal opportunity cost
A
B
5
4
3 4O X
Y
The cost of
giving up
one benefit
for getting
another
Maximum cost may not be optimum production,We have to introduce
indifference curve in order to get optimum production.
2,Indifference Curve
The different products combination that can bring same
satisfaction to consumers.
O X
Y
A（ 10,40）
B（ 25,15）
UA=UB Property of Indifference
Curve:
?There are many
indifference curve
?Further from origin means
more utility level
?Never cross with each
other
?Concave
?Negative Slope
The combination of PPC and Indifference Curve,
Equilibrium( Optimum ) Production and
Consumption
O X
Y
EA
C B
U0
U2
U1
ineffective
Impossible
Maximum
production,but
utility less than E
Equilibrium point：
Maximum production,
maximum utility
3,Exchange Rate ( Comparative price and
Trade condition
O
Y
XA
B
C
D
E
1X = 1Y
1X = 2Y
3X = 3Y
★ The exchange
rate is equal to the
slope of the line
★ The key of
exchange rate line is
its slope,not the
position,For
example,AB and DE
is in different
position but has
same slope
二、贸易前均衡
开展国际贸易前, 一国国内的生产和消费状况
Y
XO
B
A
T
生产可能性曲线
边际机会成本为 1X = 1Y
交换比率线
交换比率为 1X = 2Y
X产量扩大 X价格下跌，比如：1X = 1.5Y
国内均衡时，生产可能性曲线与交换比率线重合，实现完全专业化生产
根据生产可能性曲线的斜率
判断一国的比较优势
Y
XO
B
A
Y
XO
B1
A1
A 国 B 国
1X = 1Y
相对于 B国而言，
X成本更低
1X = 3Y
相对于 A国而
言,X成本更高，
Y成本更低
Three,Classical Trade Model ( One
Factor )
Y
XO
A
B
Y
XO
C
D
T
T
1X = 1Y
1X = 3Y
Price of X falls in international market,and Price of Y also falls,
finally reaches an equilibrium price,say,T(1X=2Y)
National A
National B
Influence of International Trade
Y
XO
A
B
Y
XO
C
D
T
T
E
J
U0
U1
U0
U1F
M
Price,X ( more comparative
advantage ) raised
Production,Production of X
expanded ( Perfect
specialization )
Consumption,
consumption
combination is in higher-
position indifference
curve,better trade off
X in Nation A,
Production OB,Consumption OX0,Surplus
X0B( Export )
Y in Nation A:
Production,0,Consumption OY0 ( imports)
X0
Y0
X in nation B Production 0,
consumption OX1( Imports)
Y in nation
Production OC,
Consumption OY1,surplus
Y1C
X1
Y1
Chap,4,Mutual Demands Theory
Used to explain how exchange rate is fixed,
and how it varies.
One,Terms of Trade
T = PXP
M
Price Index of exports
Price Index of Imports
T, Improvement of trade condition,each unit of export can exchange for more imports
T, Deterioration of trade condition,each unit of export
exchanges for less imports
Changes in Terms of Trade
Y
XO
T0
T1
T2
T3
X0
Y0
Y1
Y2
Y3
Improvement of Trade
C o n d i t i o n in A
Y
XO
T3
T2
T1
T0
Y0
X0 X1 X2 X3
Improvement of Trade
C o n d i t i o n in B
Offer Curve
OX X
Y
T0
T1
T2
U0
U1
U2
C
A
B
E
F
G
L
M
N
X0X1X2
Y0
Y1
Y2
T0,Export LA（ = OX0）,Import EL（ = OY0）
T1,Ex MB（ = OX1）,Im FM（ = OY1）
T2,EX NC（ = OX2）,Im GN（ = OY2）
T2
T1
T0
Offer
Curve
Each point along offer
curve means the
equilibrium import
and export in certain
exchange rate
General Equilibrium in International Trade
O X
Y A
B
T
T1A1
X0X1
Y0
Y1
Equilibrium international
exchange rate
Improvement of trade condition for
（ That of B fixed）
Offer Curve of A moves left
Exports decrease greatly,but
exchanged imports stay unchanged
Chap 5,Factor Endowment
? Used to solve problems left behind by Ricardo,
Reasons for comparative cost difference
? Put forward by Swedish Economists Heckscher
and Ohiler,so it is also call the Heckscher-Ohlin
model,or H-O model,also known as factor
endowment theory.
? It offers good explaining to international trade,so
still works as main stream theory in international
trade.
Chap5,1,Heckscher-Ohlin Model
One,Assumptions
1,Two nations,two products,two factors ( L and K ),2× 2× 2 model.
2,Fixed Endowment,free mobility of factor domestically,non-mobility
internationally.
3.Same technical level between two nations ( Same production function,
same endowment for same products in two nations)
Two,Notions
Factor intensity
Factor abundance
三,Heckscher-Ohlin Theorem
Each country exports the good intensive in the country's abundant
factor,and imports the good intensive in the country’s scarce factor.
两
国
要
素
禀
赋
不
同
，
导
致
两
国
要
素
价
格
不
同
要
素
价
格
差
异
导
致
生
产
成
本
差
异 生产
成
本
差
异
导
致
同
种
产
品
在
两
国
的
价
格
差
异
同
种
产
品
在
不
同
国
家
价
格
的
差
异
导
致
国
际
贸
易
发
生
两
国
要
素
密
集
度
和
要
素
丰
裕
度
的
差
异
形
成
了
不
同
产
品
的
比
较
优
势
Trade influence and benefits
Production Possibility curve in case of two factors
Y
XO
T
U
E
Due to diminishing substitution of factors,marginal
opportunity cost will increase,thus production possibility
curve is concave.
Its slope is the opportunity cost in point E,
Equilibrium in E means marginal opportunity
cost in E,Domestic equilibrium is equal to
domestic price ratio.
equilibriumX
0
Y0
Trade influences, 1) price
Y
XO
E
Domestic equilibrium pre trade,T is
domestic exchange rate
T
T1
After trade,the country
export X,and its
domestic supply of X
decreases,and price X
rises,
T?T1
A
Trade Influences 2) production
Y
XO
E
T
T1
S
X0
Y0
X1
Y1
Since the international price of
X is higher than that of domestic,
production of X will increase,
therefore,production of Y must
decrease,Production
combination will move to S.
Since in S,the international
exchange rate is equal to
domestic marginal
opportunity cost,the
country’s production of X
will not increase,With the
increase of marginal
opportunity cost,there will
not be perfect specialization.A
Trade Influences 3) Consumption
Y
XO
E
T
T1
S
A
U0
U1
C
After trade,consumers
in the nation will be
able to consume at
international price T1,
as budget constraint
moves to U1,
consumption
combination moves to
C,U1 is higher than U0,
so consumers are
better off,
Equilibrium
Y
XO
E
T
T1
S
U0
U1
C
X1X2
Y1
Y2
X：
OX1-OX2=X2X1,Ex
Y：
OY1-OY2=Y1Y2,Im
Benefit from Trade
Trade makes a nation’s consumers better off,but have different
influences to producers.
Export Producers
DX
SX
QX
PX
O
E
Q0
P0
H
GF
P1
Ex
△ HEP0：
The export producers’
surplus pre trade
△ HGP1：
The export producer’s
surplus after trade,
Difference,P1GEP0
Trade will benefit export producers,
Influence to import competitive producers
DY
SY
QY
PY
O
EP0
P1 F H
Im
K
△ P1FK：
Producer’s surplus after
trade
△ P0EK：
Producers’ surplus before
trade
Difference,P0EFP1
Trade will harm the import
competitive producers
Chap,5,2,An empirical study of H-O model
? 1,Leontif Paradox
? According to the statistical analysis of Leontif,he found
out that U.S.A.,which is a capital abundant country,
imports more captial-intensive products,while exports
more labor intensive goods,This is a paradox to H-O
model,
? 2,Explain the Paradox
1,Inverse of resource intensity
2,Trade barriers
3,Human resource
4,Natural Resources
H-O模型并没有错
Chap5.3.,Expansion of H-O model
International trade affects price production and consumption,but
will it also affect the factor payoff and price? Basing on H-O model,
we solve problems of trade to income distribution,
Stolper-Samuelson Theorem
Factor Payoff= Price（ P） × Marginal products of factors（ MP）
Value of marginal
products （ VMP）W = P× MPL
R = P× MPK
Short term,Factor non-mobility
Because of non-mobility,trade will only affect price
出
口
产
品
（X
）
价
格
上
涨
W = PX× MPL Wincreases
R = PX× MPK R
increases
All export
producers’
payoffs
increase
进
口
产
品
（Y
）
价
格
下
跌
W = PY× MPL WDecreases
R = PY× MPK R
Decreases
All import
producers’
payoffs
decrease
Long term,Because factors are mobile,trade not
only affects price,but also the marginal products.
劳
动
密
集
行
的
出
口
行
业
报
酬
提
高
资
本
密
集
型
的
进
口
竞
争
行
业
的
要
素
向
出
口
行
业
流
动
进
口
竞
争
行
业
流
出
的
资
本
比
劳
动
多
出
口
行
业
需
要
的
劳
动
比
资
本
多
资
本
相
对
过
剩
，
价
格
降
低
劳
动
相
对
稀
缺
，
价
格
提
高
各
行
业
投
入
更
多
资
本
，
资
本/
劳
动
比
率
提
高
劳
动
生
产
率
提
高
，
资
本
生
产
率
下
降
劳
动
的
边
际
产
品
增
加
，
资
本
的
边
际
产
品
减
少
Continue
出
口
行
业
W = PX× MPL PX上涨,MPL增加 W 提高
R = PX× MPK PX上涨,MPK减少 R？
进
口
竞
争
行
业
W = PY× MPL PY下跌,MPL增加 W？
R = PY× MPK PY下跌,MPK减少 R下降
Payoff of the factor intensively
used by exporters will increase
Payoff of the factor intensively
used by importers will decrease
Continue
Labor market is in equilibrium before trade
WX = WY,RX = RY
Factor market will also form equilibrium after trade
WX increases,WY also increases；
RX decreases,RY also decreases
In long term,after trade,Payoff of the factor
intensively used by exporters will increase,and
Payoff of the factor intensively used by importers
will decrease,this is try in any industry.
Factor price equalization theory
Explains the influence of trade among countries to the
factor price in two countries,
A
国
贸
易
前
W 低
R 高
贸
易
后
W提高
R 降低
B
国
贸
易
前
W 高
R 低
贸
易
后
W降低
R 提高
均等
Chap 6,New Trade Theory
? Changes in international
Trade
? Increase of Intra-industry Trade
? Development of trade within
developed countries
Trade between
goods with similar
or same
endowments
H-O cannot explain
Amendments of
assumptions of H-O
model,develops to
new trade theory
General points of new trade theories
? Imperfect Competition
1,Differentiated products (Intra-industry trade)
2,Monopoly power ( price difference)
? Large – Scale Economy
1,Internal ( enterprises)
2,External ( Industry)
Intra-industry trade and cross-
industry trade
Domestic
（ Rich in Capital）
Foreign
（ Rich in labor ）
products Foodstuff
Cross-industry
trade
Intra-industry
trade
Trade due to external scale economy
One,in case of perfect competition
Q
P
O
D1
S1
P1
AC1
MC1P,C
O qq1Q1
Before trade,supply and demand （ S1,D1） determine
equilibrium price （ P1）,the MC and AC are MC1 and AC1,
Q
P
O
D1
S1
P1
AC1
MC1P,C
O qq1Q1
S2
Enlarge of industry,
supply,supply
increases to S2
AC2
AC decreases
Meanwhile,market price
falls,and trade happens
Q2
P2
D2
MC2
Foreign demands
increase,demand
curves moves
International
price stays at P2
Output from enterprises
stay unchanged
Reason of trade is because of the price change due to external scale economy
二,Trade Equilibrium at external Scale
of economy
X
Y
O
Production curve of increasing return to scale,diminishing marginal
opportunity cost
E
T
Suppose other
conditions are same
for two nations,
equilibrium point is E
U
J
H U1
T1
E1
Suppose the production scale of two nations
change,production combination moves to J and H,
trade according to same exchange rate (T1) before
trade
T2
Trade is due to the price advantage of X when
industry scale is expanded,
Suppose X and Y are two
products in same industry
Trade due to Internal Scale of Economy,
Imperfect competitive market
QO
D1
MR1
MC
Q1
P1
P,C
E
AC
Suppose marginal cost
stay unchanged
Due to scale of economy,average cost falls,
enterprises will trade
D2
MR2
P2
AC2
Q2
Demand curve and marginal income curve
move right,but slope is less( more
elasticity)
Price （ P2） in short ter is
higher than average cost
（ AC2）,enterprise have
monopoly profit
No monopoly
profit
Long term
equilibrium
QO
P,C
D2
MR2
MC
Q2
AC2
P2
AC
Short term
monopoly profit
MR3
D3
Q3
P3
New firm enter
Demand of the
products decreases
Expansion of industry scale lower
average cost,and competition
eliminates monopoly profit.
Scale of economy causes trade,which
consequently increase consumer
surplus( welfare improves),better
specialization
Krugman Model
? Three relations
1,Relation of Quantity of producers and Average Cost,The
bigger the quantity of producers,the less a single
producer’s output,and AC is higher
2,Relation of Quantity of producers and price,The more the
producers,the more serious the competition,the lower the
price.
3,When price is higher than AC( has monopoly profit),other
producers will go into the industry,while in other cases,
when price is lower than AC( monopoly profit is negative),
producers will go out of the industry,
? In graph,relation of quantity of producers and AC is CC
curve( in positive relationship),; Relation of Quantity of
producers and price is PP curve in the graph ( in negative
relationship),In long term,quantity of producers is
determined by the cross of two curves,
Continued
N
P,C
CC
PP
O
E
P1
AC1
N0N1
P2
AC2
N2
Monopoly profit exists,new producers go in,N increases
Loss,producers
go out,N
decreases
Equil
ibriu
m 均
衡
Trade
Equilibrium
N
P,C
O
PP
CC1
CC2
N1 N2
P1
P2
E1
E2
Scale of economy lower
the AC,has price
advantage,export
The lower AC
makes CC curve
moves right,new
producers go in,N
increases
More competition means lower price
Scale of economy
causes lower price,
bring with trade,
improve consumer’s
welfare,make
producers specialized,
scale of economy
expands,and more
choices for
consumers,
Products life cycle model ( technical
transfer)
t
Ex
Im
O
USA：
UK
China：
Trade happens due to the technical
difference,explains intra-industry
trade in different time
Chap 7,Economic growth and
international trade
Solve problems of the influence of economic
variation to international trade
Resource of growth
Increase of factors and
technical improvements Increase of GDP
Results of growth
O X
Y
A
B
A1
B1
Balanced growth and unbalanced growth
Balanced Growth
O X
Y
A
B
E
A1
B1
E1
Same Slope
O X
Y
A
B
Unbalanced growth
C
D
F
G
import replacing growth
export expansion
growth
Economic growth and trade
Growth and trade of small country
IRG
O X
Y
A
B T
T
C
D
U0
U1
F
GH
L
M N
O X
Y
A
B T
U0F
GH
U1
L
M N
T
EEG
Trade condition stay unchanged,import
and export change in same ratio
Trade volume does not affect international exchange rate ( Trade condition )
C
D
RybcZynski Theorem
O X
Y
B T
A
C
D TX1 X2
Y1
Y2
The scale of decrease of
X’s cost is larger than that
of Y,so production of X will
increase till equal to
marginal opportunity cost
( slope of T ),output of Y is
absolutely lower,
Growth and trade for Large Country
大国 增长与贸易
Import replacing growth
XO
Y
A
B D
C
T0
F E
G
H
J K
T1
U0
U1
U2
T2
Welfare improves,HJ
＞ GF,due to
international market
price of Y falls,trade
condition improves,
the certain amount of
the nation’s products
could exchange for
more import goods,
Export expansion growth
XO
Y
A
B
T0
F E
G
U0
T1
K
H
J
U1
U2
T2
Export of X increase for large country,which causes
international market price of X falls,trade condition changes,
Welfare improves,JK>FE,
more export products are
needed in exchange for a
certain amount of import goods,
trade condition deteriorates,C
D
Immiserizing growth
Y
O X
A
B
C
D
T
T1
U0
U1
Chap 8,Protectionism and Policies
When free trade can make two countries better
off,why should there be trade protection?
One,Policies of the mercantilism
只
有
金
银
才
是
财
富
任
何
国
家
金
银
储
量
都
是
有
限
的
，
只
有
靠
出
口
赚
取
别
国
金
银
才
能
增
加
本
国
财
富
同
时
要
限
制
或
禁
止
本
国
购
买
别
国
商
品
支
出
本
国
金
银
限制或禁止进口，
同时鼓励出口
Two,Protection theory of List
There should be different trade policies
in different stages of economic development.
Trade protectionism of Keynesian
Aggregate Demand:
C ＋ I ＋ G ＋ X
Aggregate Supply：
C ＋ S ＋ T ＋ M＝
消
费
投
资
政
府
支
出
出
口
消
费
储
蓄
进
口
政
府
收
入
Equation of Aggregate Demands
Y ＝ C ＋ I ＋ G ＋（ X－ M）
Net Export
Trade Multiplier
Consumption
Function：
C＝ Ca＋ bY
自
发
消
费
引
致
消
费
MPC X Income
Y＝ Ca＋ bY＋ I＋ G＋（ X－ M）
不考虑 Ca,I和 G
Y＝ bY＋（ X－ M）
Y－ bY＝（ X－ M）
Y＝ 1
1－ b
（ X－ M）
Let
1
1－ b ＝ k,Y＝ k（ X－ M）
In order to increase Y,needs to increase (X—M),or the
exports,and decrease imports,then Y is increased by
K times.
New Trade protectionism
Strategic Trade policy
Prisoner’s
dilemma
A
B
confess Not confess
confess
Not confess
5,5
10,1
1,10
0,0
Nash
equilibrium
Strategic Trade policies
B
oi
ng
Ai r bus
Produce Not produce
Produce
Not produce
－ 5，－ 5
0,100
100,0
0,0
B
oi
ng
Ai r bus
produce Not Produce
Produce
Not Produce
－ 5,20
0,125
100,0
0,0
政
府
可
以
采
取
措
施
帮
助
本
国
企
业
获
得
战
略
性
优
势
Other reasons for trade protection
? Protect young industries
1,Protect industries whose average cost not higher than that of
international market price in future
2,Cost should be lower than the income of the industry in future
3,Industry must be free join an exit
? Promote capital formation and industry multilateral
? Improve trade conditions and international balance of
payments
? Increase employment and sustain high salary
? Promote economic development of developing countries.
Chap 9,Trade management theories
and policies
Li
mi
te
d
im
po
rt
Tariff
Non-tariff
Barriers
Quantity limitations
Price limitations
Purchase control
Financial control
TBT
Im
pr
ov
e
ex
po
rt
E x por t c r e di t
National Guarantee of export credit
Export subsidy
Dumping
Tariff
Basic Ideas（ P.113~116）
ERP
ERP＝ V ’ － VV
V ’ ＝（ Final price of exports +Duty)– price of Imported material
V＝ price of foreign end products—foreign material price
Under a certain nominal tariff rate,the lower the nominal tariff rate
attached to raw material and medium goods,the more the
protection level to the end products
Economic effects of tariff
Solve problems of the influences on import price,
and welfare of import producer,consumer and
government,
1.Partial Equilibrium of small nation
PY
QYO
S
D
P w
P t
F
A
G
a b c d
Price in international
market
Price of imports after tax
① price increase
Q1 Q2Q3 Q4
Import before tax
② imports decrease after tax
e
B
C
H
③ loss of consumer is a+b+c+d
④ producer surplus is increased a
⑤ government tariff income is c
Loss,a+b+c+d（ Consumer）
Benefit,a（ producer） +c（ government）
⑥ net befefit,－（ b+d）
2.Partial equilibrium analysis of
large countries
PY
QYO
S
D
Pw
Pt
PW1
Pt1
Q1 Q3 Q4 Q4
a b c d
f
t
PW1,Imports of large countries decreases,international market price falls
Pt1,Domestic decreases after tax
Influence of tariff to some American products
( in Million dollars)
R u b b e r
shoes 41.9 -272.2 188.4 44.1 39.7Women
shoes 10.0 -325.1 253.4 54.6 17.1tile 19.1 -90.0 77.6 10.0 2.4
c a s e s 16.3 -186.3 139.8 36.4 10.1
Leather
g l o v e s 15.3 -28.1 15.0 10.8 2.2China 14.2 -43.8 33.3 9.2 1.3
Pottery 9.4 -34.7 33.7 0.8 0.2
bags 12.5 -134.4 103.4 25.7 5.3
Artificial
j e w l r y
9.9 -86.7 59.5 20.7 6.5
12.9 -185.8 99.0 77.2 9.6
Bicycle 11.0 -38.1 26.4 10.0 1.7
Product Tariff（ %） Consumer Cost Tariff Income ProducerIncome Net cost
Non trade barreiers
数
量
限
制
Import
Quota
Absolute
Quota
Tariff
Quota
Global Quota
Regional Quota
Importer Quota
Import
license
Voluntary
export restraint
Economic effects of import quota
O
P
QD
S
PW
PQ
Q1 Q3 Q4 Q2
a b c d
Situation of Import Quota
The voluntary export limitation
of Chinese products
VER
Chinese products that carry with quota
中国目前实施 配额管理 的产品
Policies aiming at improving export
E x p o r t
S u b s id y
出
口
补
贴
D i r e c t
Subsi dy
Indi r ect
subsi dy
世界各国的出口补贴
出口退税
口退税办法
Dumping
Economic
Effects P,C
QQ O
DF
MRF
MCMC
DD MRD
PF
PD
price discrimination 垄断企业
Foreign
markets
Domestic
market
Foreign markets has
more demand elasticity
than domestic marketDomestic price is
higher than price
in foreign
markets
China and Anti-dumping
Chinese-made television sets
Issues of China’s role as market economy
Latest cases
China’s implement of anti-dumping
Revolution of China’s foreign trade
,十一五规划纲要,
Chap 10,Economic Integration,
theory and practice
Forms of economic integration
Preferential Tariff Area
Free Trade Area
Customs union
Common Markets
Economic Union
Perfectly economic integration,？
Definition
of
WTO
Theory of customs union
T r a d e c r e a t i o n
Once the zollverein is set up,as tariff is cancelled,trade which
was formerly banned by tariff will generate
O Q
P
D
S
S1E
F
P0
P1 G
Q0 Q1Q2
After the cancellation of tariff,
foreign products are imported,
domestic supply increase to S1
Consumer surplus
increases P0EFP1
Producers surplus loses
P0EGP1
Net trade off
increase EFG
Imports
Trade diversion
Q1 Q2Q3 Q4O Q
P
D
S
PC
PB
PC+T a
b
c dh
PA
After integration,trade with non-members
will be transferred to member countries.
Q1Q2,Imports before
integration
Q3Q4,Imports of B
Consumer surplus after
integration increases h+c+a+d
Producer surplus decreases h
Tariff loss a+b
Net benefit,（ c＋ d）－ b
Economic Integration in
Europe
Economic Integration in Europe and
China-Euro Economic Relationship
Economic Integration
in Europe
China-Euro Economic
Relationship
China’s participation into International
Regional Economic Integration
上 海 合 作 组 织
CEPA
AP
EC
Construction of China-ASEAN Free
Trade Area
AS
EA
N
CAFTA
Yu
nn
an
an
d C
AF
TA
云南天然是中心
Free Trade Area between China and
other countries
China and Chile,2004年 12月举行第一轮谈判。 05年 9月
称取得重大突破。 11月 18日签署 FTA协定，从 2006年 7月 1日
开始，全面启动货物贸易的关税减让进程。其中，占两国税
目总数 97%的产品将于 10年内分阶段降为零关税。
China and Gulf countries,沙特阿拉伯、阿联酋、科威特、
阿曼、塔卡尔和巴林。 05年 4月第一轮谈判 。计划在 06年签
署 FTA
China and Pakistan, 05年 2月同意尽快在特惠贸易协议下
确定零关税产品。 4月，两国同意自 2006年 1月 1日起开始降
低双方贸易产品关税，并在 2008年 1月 1日前消除 2246种贸易
产品关税。 8月，宣布有望一年内结束 FTA谈判
04年 6月，同意启动中国与南部非洲关税同盟（ SACU，南
非、纳米比亚、博茨瓦纳、莱索托、斯威士兰） FTA谈判。
China and Korea,05年 3月就“启动中韩 FTA可行性和政策
提案民间共同研究”达成协议
China and India,05年 4月启动中印区域贸易安排可行性研
究
China and Iceland,05年 5月同意就两国间签署自由贸易协
议进行可行性研究。
China and Australia, 05年 5月正式启动谈判。 11月，第三
轮结束，完成第一阶段
China and New Zealand, 04年 12月启动谈判,05年 7月第
四轮。 12月 1日称第五轮取得进展。温家宝 06年 4月 10日在新
西兰访问期间表示，中国和新西兰自由贸易协定（ FTA）将
在两年内达成，这将是中国与发达国家签订的第一个自贸协
定。
Chap,12,WTO
Introduction （ p.184~194）
,Doha Round‖
C h i n a a n d W T O
Theory and Policy
School of Economics,Yunnan University
Zhang Jianhua and Zhang Lin
Chap,1 Introduction
? One,Course Outline
? Basic theory in Economics ( Analysis of commodity and
factor mobility in open Macro economy by tools
Microeconomics
? Contents:
1,Pure Theory in International Trade ( Reason and Influence of
International Trade)
2,Policy of International Trade （ Policies aiming at limiting
imports while encouraging exports）
3,Institutions for International Trade（ WTO Institutions ）
Two Basic Concepts
? balance of trade
1,Trade Surplus（ Exports＞ Imports,Favorable Balance of
Trade）
2,Trade Deficit （ Exports＜ Imports,Unfavorable Balance
of Trade）
3,Trade Balance （ Exports ＝ Imports）
? Trade Structure
1,Commodity Structure
2,Geographical Structure
? Dependency of Trade
2004,2005年
中国的贸易收支
2004年中国对外贸易依存度
接近 70%
2005年中国主要进出口商品
Chap,3 Comparative Cost and
Classical Trade Theorem
? In this chapter,we introduce theorem of international trade,
We start such introduction looking at causes of
international trade and its influences in the economy ( in
Chap 3,4,5 and 6),then we will analyze the influences of
economics in trade,
One,Theory of Absolute Cost
Theory of absolute cost
It is a theoretical explanation to the cause of international
trade
Introduced by Adam Smith in his ― Wealth of Nations‖
Graph of Absolute Cost
Unit Cost Calculated in terms of labor
UK Portugal
Carpet
Wine
4
8
6
3
Each country produces
goods absolutely low in
cost,in exchange for
other countries’ goods
absolutely low in cost
Trade based
on division
of l a b o r
Reason of trade is because of
differences in absolute cost
Could
countries
have
trade
without
absolute
difference
s in cost?
Chap 3,2,Comparative Cost
? David Ricardo,1817
? Background
谷
物
法
Cultivation of wheat expands,
land of grass shrinks,and
price of wool goes up小
麦
价
格
上
涨
Labor is more expansive
Food expend increases,end
goods expend decreases
Revenge from other countries,
export of end products
decrease
损
害
了
资
产
阶
级
的
利
益
要
求
自
由
贸
易
Case of Ricardian Model
Unit Cost Calculated in terms of labor
Britain Portugal
Carpet
Wine
4
8
6
10
Assumptions：
Two nations,two products,one factor,fixed productivity,sufficient
employment,perfect competition,non-mobility of factor,barter,no
technological improvement,no transportation cost
The absolute costs of both products in Britain is lower than
that in Portugal,why is there still trade between these two
countries
A necessary condition of international
trade,Comparative cost difference
A sufficient condition of international trade,
international exchange rate is between
domestic exchange rates in both countries.
There is benefit
from trade
Limitation,Why there is
comparative cost？
Chap3,3,Classical trade model
based on comparative cost
Used to explain,Reasons and influences of trade ( Price,
Production,Consumption and Welfare,
1,Analysis Tools
1) Production
Possibility Curve
The maximum
production when
factors are fully
employed,
A（ 0,100）
B（ 100,0）
O X
Y
C（ X1,Y1）
Property of Production Possibility Curve
Slope of PPC is equal to marginal opportunity cost
A
B
5
4
3 4O X
Y
The cost of
giving up
one benefit
for getting
another
Maximum cost may not be optimum production,We have to introduce
indifference curve in order to get optimum production.
2,Indifference Curve
The different products combination that can bring same
satisfaction to consumers.
O X
Y
A（ 10,40）
B（ 25,15）
UA=UB Property of Indifference
Curve:
?There are many
indifference curve
?Further from origin means
more utility level
?Never cross with each
other
?Concave
?Negative Slope
The combination of PPC and Indifference Curve,
Equilibrium( Optimum ) Production and
Consumption
O X
Y
EA
C B
U0
U2
U1
ineffective
Impossible
Maximum
production,but
utility less than E
Equilibrium point：
Maximum production,
maximum utility
3,Exchange Rate ( Comparative price and
Trade condition
O
Y
XA
B
C
D
E
1X = 1Y
1X = 2Y
3X = 3Y
★ The exchange
rate is equal to the
slope of the line
★ The key of
exchange rate line is
its slope,not the
position,For
example,AB and DE
is in different
position but has
same slope
二、贸易前均衡
开展国际贸易前, 一国国内的生产和消费状况
Y
XO
B
A
T
生产可能性曲线
边际机会成本为 1X = 1Y
交换比率线
交换比率为 1X = 2Y
X产量扩大 X价格下跌，比如：1X = 1.5Y
国内均衡时，生产可能性曲线与交换比率线重合，实现完全专业化生产
根据生产可能性曲线的斜率
判断一国的比较优势
Y
XO
B
A
Y
XO
B1
A1
A 国 B 国
1X = 1Y
相对于 B国而言，
X成本更低
1X = 3Y
相对于 A国而
言,X成本更高，
Y成本更低
Three,Classical Trade Model ( One
Factor )
Y
XO
A
B
Y
XO
C
D
T
T
1X = 1Y
1X = 3Y
Price of X falls in international market,and Price of Y also falls,
finally reaches an equilibrium price,say,T(1X=2Y)
National A
National B
Influence of International Trade
Y
XO
A
B
Y
XO
C
D
T
T
E
J
U0
U1
U0
U1F
M
Price,X ( more comparative
advantage ) raised
Production,Production of X
expanded ( Perfect
specialization )
Consumption,
consumption
combination is in higher-
position indifference
curve,better trade off
X in Nation A,
Production OB,Consumption OX0,Surplus
X0B( Export )
Y in Nation A:
Production,0,Consumption OY0 ( imports)
X0
Y0
X in nation B Production 0,
consumption OX1( Imports)
Y in nation
Production OC,
Consumption OY1,surplus
Y1C
X1
Y1
Chap,4,Mutual Demands Theory
Used to explain how exchange rate is fixed,
and how it varies.
One,Terms of Trade
T = PXP
M
Price Index of exports
Price Index of Imports
T, Improvement of trade condition,each unit of export can exchange for more imports
T, Deterioration of trade condition,each unit of export
exchanges for less imports
Changes in Terms of Trade
Y
XO
T0
T1
T2
T3
X0
Y0
Y1
Y2
Y3
Improvement of Trade
C o n d i t i o n in A
Y
XO
T3
T2
T1
T0
Y0
X0 X1 X2 X3
Improvement of Trade
C o n d i t i o n in B
Offer Curve
OX X
Y
T0
T1
T2
U0
U1
U2
C
A
B
E
F
G
L
M
N
X0X1X2
Y0
Y1
Y2
T0,Export LA（ = OX0）,Import EL（ = OY0）
T1,Ex MB（ = OX1）,Im FM（ = OY1）
T2,EX NC（ = OX2）,Im GN（ = OY2）
T2
T1
T0
Offer
Curve
Each point along offer
curve means the
equilibrium import
and export in certain
exchange rate
General Equilibrium in International Trade
O X
Y A
B
T
T1A1
X0X1
Y0
Y1
Equilibrium international
exchange rate
Improvement of trade condition for
（ That of B fixed）
Offer Curve of A moves left
Exports decrease greatly,but
exchanged imports stay unchanged
Chap 5,Factor Endowment
? Used to solve problems left behind by Ricardo,
Reasons for comparative cost difference
? Put forward by Swedish Economists Heckscher
and Ohiler,so it is also call the Heckscher-Ohlin
model,or H-O model,also known as factor
endowment theory.
? It offers good explaining to international trade,so
still works as main stream theory in international
trade.
Chap5,1,Heckscher-Ohlin Model
One,Assumptions
1,Two nations,two products,two factors ( L and K ),2× 2× 2 model.
2,Fixed Endowment,free mobility of factor domestically,non-mobility
internationally.
3.Same technical level between two nations ( Same production function,
same endowment for same products in two nations)
Two,Notions
Factor intensity
Factor abundance
三,Heckscher-Ohlin Theorem
Each country exports the good intensive in the country's abundant
factor,and imports the good intensive in the country’s scarce factor.
两
国
要
素
禀
赋
不
同
，
导
致
两
国
要
素
价
格
不
同
要
素
价
格
差
异
导
致
生
产
成
本
差
异 生产
成
本
差
异
导
致
同
种
产
品
在
两
国
的
价
格
差
异
同
种
产
品
在
不
同
国
家
价
格
的
差
异
导
致
国
际
贸
易
发
生
两
国
要
素
密
集
度
和
要
素
丰
裕
度
的
差
异
形
成
了
不
同
产
品
的
比
较
优
势
Trade influence and benefits
Production Possibility curve in case of two factors
Y
XO
T
U
E
Due to diminishing substitution of factors,marginal
opportunity cost will increase,thus production possibility
curve is concave.
Its slope is the opportunity cost in point E,
Equilibrium in E means marginal opportunity
cost in E,Domestic equilibrium is equal to
domestic price ratio.
equilibriumX
0
Y0
Trade influences, 1) price
Y
XO
E
Domestic equilibrium pre trade,T is
domestic exchange rate
T
T1
After trade,the country
export X,and its
domestic supply of X
decreases,and price X
rises,
T?T1
A
Trade Influences 2) production
Y
XO
E
T
T1
S
X0
Y0
X1
Y1
Since the international price of
X is higher than that of domestic,
production of X will increase,
therefore,production of Y must
decrease,Production
combination will move to S.
Since in S,the international
exchange rate is equal to
domestic marginal
opportunity cost,the
country’s production of X
will not increase,With the
increase of marginal
opportunity cost,there will
not be perfect specialization.A
Trade Influences 3) Consumption
Y
XO
E
T
T1
S
A
U0
U1
C
After trade,consumers
in the nation will be
able to consume at
international price T1,
as budget constraint
moves to U1,
consumption
combination moves to
C,U1 is higher than U0,
so consumers are
better off,
Equilibrium
Y
XO
E
T
T1
S
U0
U1
C
X1X2
Y1
Y2
X：
OX1-OX2=X2X1,Ex
Y：
OY1-OY2=Y1Y2,Im
Benefit from Trade
Trade makes a nation’s consumers better off,but have different
influences to producers.
Export Producers
DX
SX
QX
PX
O
E
Q0
P0
H
GF
P1
Ex
△ HEP0：
The export producers’
surplus pre trade
△ HGP1：
The export producer’s
surplus after trade,
Difference,P1GEP0
Trade will benefit export producers,
Influence to import competitive producers
DY
SY
QY
PY
O
EP0
P1 F H
Im
K
△ P1FK：
Producer’s surplus after
trade
△ P0EK：
Producers’ surplus before
trade
Difference,P0EFP1
Trade will harm the import
competitive producers
Chap,5,2,An empirical study of H-O model
? 1,Leontif Paradox
? According to the statistical analysis of Leontif,he found
out that U.S.A.,which is a capital abundant country,
imports more captial-intensive products,while exports
more labor intensive goods,This is a paradox to H-O
model,
? 2,Explain the Paradox
1,Inverse of resource intensity
2,Trade barriers
3,Human resource
4,Natural Resources
H-O模型并没有错
Chap5.3.,Expansion of H-O model
International trade affects price production and consumption,but
will it also affect the factor payoff and price? Basing on H-O model,
we solve problems of trade to income distribution,
Stolper-Samuelson Theorem
Factor Payoff= Price（ P） × Marginal products of factors（ MP）
Value of marginal
products （ VMP）W = P× MPL
R = P× MPK
Short term,Factor non-mobility
Because of non-mobility,trade will only affect price
出
口
产
品
（X
）
价
格
上
涨
W = PX× MPL Wincreases
R = PX× MPK R
increases
All export
producers’
payoffs
increase
进
口
产
品
（Y
）
价
格
下
跌
W = PY× MPL WDecreases
R = PY× MPK R
Decreases
All import
producers’
payoffs
decrease
Long term,Because factors are mobile,trade not
only affects price,but also the marginal products.
劳
动
密
集
行
的
出
口
行
业
报
酬
提
高
资
本
密
集
型
的
进
口
竞
争
行
业
的
要
素
向
出
口
行
业
流
动
进
口
竞
争
行
业
流
出
的
资
本
比
劳
动
多
出
口
行
业
需
要
的
劳
动
比
资
本
多
资
本
相
对
过
剩
，
价
格
降
低
劳
动
相
对
稀
缺
，
价
格
提
高
各
行
业
投
入
更
多
资
本
，
资
本/
劳
动
比
率
提
高
劳
动
生
产
率
提
高
，
资
本
生
产
率
下
降
劳
动
的
边
际
产
品
增
加
，
资
本
的
边
际
产
品
减
少
Continue
出
口
行
业
W = PX× MPL PX上涨,MPL增加 W 提高
R = PX× MPK PX上涨,MPK减少 R？
进
口
竞
争
行
业
W = PY× MPL PY下跌,MPL增加 W？
R = PY× MPK PY下跌,MPK减少 R下降
Payoff of the factor intensively
used by exporters will increase
Payoff of the factor intensively
used by importers will decrease
Continue
Labor market is in equilibrium before trade
WX = WY,RX = RY
Factor market will also form equilibrium after trade
WX increases,WY also increases；
RX decreases,RY also decreases
In long term,after trade,Payoff of the factor
intensively used by exporters will increase,and
Payoff of the factor intensively used by importers
will decrease,this is try in any industry.
Factor price equalization theory
Explains the influence of trade among countries to the
factor price in two countries,
A
国
贸
易
前
W 低
R 高
贸
易
后
W提高
R 降低
B
国
贸
易
前
W 高
R 低
贸
易
后
W降低
R 提高
均等
Chap 6,New Trade Theory
? Changes in international
Trade
? Increase of Intra-industry Trade
? Development of trade within
developed countries
Trade between
goods with similar
or same
endowments
H-O cannot explain
Amendments of
assumptions of H-O
model,develops to
new trade theory
General points of new trade theories
? Imperfect Competition
1,Differentiated products (Intra-industry trade)
2,Monopoly power ( price difference)
? Large – Scale Economy
1,Internal ( enterprises)
2,External ( Industry)
Intra-industry trade and cross-
industry trade
Domestic
（ Rich in Capital）
Foreign
（ Rich in labor ）
products Foodstuff
Cross-industry
trade
Intra-industry
trade
Trade due to external scale economy
One,in case of perfect competition
Q
P
O
D1
S1
P1
AC1
MC1P,C
O qq1Q1
Before trade,supply and demand （ S1,D1） determine
equilibrium price （ P1）,the MC and AC are MC1 and AC1,
Q
P
O
D1
S1
P1
AC1
MC1P,C
O qq1Q1
S2
Enlarge of industry,
supply,supply
increases to S2
AC2
AC decreases
Meanwhile,market price
falls,and trade happens
Q2
P2
D2
MC2
Foreign demands
increase,demand
curves moves
International
price stays at P2
Output from enterprises
stay unchanged
Reason of trade is because of the price change due to external scale economy
二,Trade Equilibrium at external Scale
of economy
X
Y
O
Production curve of increasing return to scale,diminishing marginal
opportunity cost
E
T
Suppose other
conditions are same
for two nations,
equilibrium point is E
U
J
H U1
T1
E1
Suppose the production scale of two nations
change,production combination moves to J and H,
trade according to same exchange rate (T1) before
trade
T2
Trade is due to the price advantage of X when
industry scale is expanded,
Suppose X and Y are two
products in same industry
Trade due to Internal Scale of Economy,
Imperfect competitive market
QO
D1
MR1
MC
Q1
P1
P,C
E
AC
Suppose marginal cost
stay unchanged
Due to scale of economy,average cost falls,
enterprises will trade
D2
MR2
P2
AC2
Q2
Demand curve and marginal income curve
move right,but slope is less( more
elasticity)
Price （ P2） in short ter is
higher than average cost
（ AC2）,enterprise have
monopoly profit
No monopoly
profit
Long term
equilibrium
QO
P,C
D2
MR2
MC
Q2
AC2
P2
AC
Short term
monopoly profit
MR3
D3
Q3
P3
New firm enter
Demand of the
products decreases
Expansion of industry scale lower
average cost,and competition
eliminates monopoly profit.
Scale of economy causes trade,which
consequently increase consumer
surplus( welfare improves),better
specialization
Krugman Model
? Three relations
1,Relation of Quantity of producers and Average Cost,The
bigger the quantity of producers,the less a single
producer’s output,and AC is higher
2,Relation of Quantity of producers and price,The more the
producers,the more serious the competition,the lower the
price.
3,When price is higher than AC( has monopoly profit),other
producers will go into the industry,while in other cases,
when price is lower than AC( monopoly profit is negative),
producers will go out of the industry,
? In graph,relation of quantity of producers and AC is CC
curve( in positive relationship),; Relation of Quantity of
producers and price is PP curve in the graph ( in negative
relationship),In long term,quantity of producers is
determined by the cross of two curves,
Continued
N
P,C
CC
PP
O
E
P1
AC1
N0N1
P2
AC2
N2
Monopoly profit exists,new producers go in,N increases
Loss,producers
go out,N
decreases
Equil
ibriu
m 均
衡
Trade
Equilibrium
N
P,C
O
PP
CC1
CC2
N1 N2
P1
P2
E1
E2
Scale of economy lower
the AC,has price
advantage,export
The lower AC
makes CC curve
moves right,new
producers go in,N
increases
More competition means lower price
Scale of economy
causes lower price,
bring with trade,
improve consumer’s
welfare,make
producers specialized,
scale of economy
expands,and more
choices for
consumers,
Products life cycle model ( technical
transfer)
t
Ex
Im
O
USA：
UK
China：
Trade happens due to the technical
difference,explains intra-industry
trade in different time
Chap 7,Economic growth and
international trade
Solve problems of the influence of economic
variation to international trade
Resource of growth
Increase of factors and
technical improvements Increase of GDP
Results of growth
O X
Y
A
B
A1
B1
Balanced growth and unbalanced growth
Balanced Growth
O X
Y
A
B
E
A1
B1
E1
Same Slope
O X
Y
A
B
Unbalanced growth
C
D
F
G
import replacing growth
export expansion
growth
Economic growth and trade
Growth and trade of small country
IRG
O X
Y
A
B T
T
C
D
U0
U1
F
GH
L
M N
O X
Y
A
B T
U0F
GH
U1
L
M N
T
EEG
Trade condition stay unchanged,import
and export change in same ratio
Trade volume does not affect international exchange rate ( Trade condition )
C
D
RybcZynski Theorem
O X
Y
B T
A
C
D TX1 X2
Y1
Y2
The scale of decrease of
X’s cost is larger than that
of Y,so production of X will
increase till equal to
marginal opportunity cost
( slope of T ),output of Y is
absolutely lower,
Growth and trade for Large Country
大国 增长与贸易
Import replacing growth
XO
Y
A
B D
C
T0
F E
G
H
J K
T1
U0
U1
U2
T2
Welfare improves,HJ
＞ GF,due to
international market
price of Y falls,trade
condition improves,
the certain amount of
the nation’s products
could exchange for
more import goods,
Export expansion growth
XO
Y
A
B
T0
F E
G
U0
T1
K
H
J
U1
U2
T2
Export of X increase for large country,which causes
international market price of X falls,trade condition changes,
Welfare improves,JK>FE,
more export products are
needed in exchange for a
certain amount of import goods,
trade condition deteriorates,C
D
Immiserizing growth
Y
O X
A
B
C
D
T
T1
U0
U1
Chap 8,Protectionism and Policies
When free trade can make two countries better
off,why should there be trade protection?
One,Policies of the mercantilism
只
有
金
银
才
是
财
富
任
何
国
家
金
银
储
量
都
是
有
限
的
，
只
有
靠
出
口
赚
取
别
国
金
银
才
能
增
加
本
国
财
富
同
时
要
限
制
或
禁
止
本
国
购
买
别
国
商
品
支
出
本
国
金
银
限制或禁止进口，
同时鼓励出口
Two,Protection theory of List
There should be different trade policies
in different stages of economic development.
Trade protectionism of Keynesian
Aggregate Demand:
C ＋ I ＋ G ＋ X
Aggregate Supply：
C ＋ S ＋ T ＋ M＝
消
费
投
资
政
府
支
出
出
口
消
费
储
蓄
进
口
政
府
收
入
Equation of Aggregate Demands
Y ＝ C ＋ I ＋ G ＋（ X－ M）
Net Export
Trade Multiplier
Consumption
Function：
C＝ Ca＋ bY
自
发
消
费
引
致
消
费
MPC X Income
Y＝ Ca＋ bY＋ I＋ G＋（ X－ M）
不考虑 Ca,I和 G
Y＝ bY＋（ X－ M）
Y－ bY＝（ X－ M）
Y＝ 1
1－ b
（ X－ M）
Let
1
1－ b ＝ k,Y＝ k（ X－ M）
In order to increase Y,needs to increase (X—M),or the
exports,and decrease imports,then Y is increased by
K times.
New Trade protectionism
Strategic Trade policy
Prisoner’s
dilemma
A
B
confess Not confess
confess
Not confess
5,5
10,1
1,10
0,0
Nash
equilibrium
Strategic Trade policies
B
oi
ng
Ai r bus
Produce Not produce
Produce
Not produce
－ 5，－ 5
0,100
100,0
0,0
B
oi
ng
Ai r bus
produce Not Produce
Produce
Not Produce
－ 5,20
0,125
100,0
0,0
政
府
可
以
采
取
措
施
帮
助
本
国
企
业
获
得
战
略
性
优
势
Other reasons for trade protection
? Protect young industries
1,Protect industries whose average cost not higher than that of
international market price in future
2,Cost should be lower than the income of the industry in future
3,Industry must be free join an exit
? Promote capital formation and industry multilateral
? Improve trade conditions and international balance of
payments
? Increase employment and sustain high salary
? Promote economic development of developing countries.
Chap 9,Trade management theories
and policies
Li
mi
te
d
im
po
rt
Tariff
Non-tariff
Barriers
Quantity limitations
Price limitations
Purchase control
Financial control
TBT
Im
pr
ov
e
ex
po
rt
E x por t c r e di t
National Guarantee of export credit
Export subsidy
Dumping
Tariff
Basic Ideas（ P.113~116）
ERP
ERP＝ V ’ － VV
V ’ ＝（ Final price of exports +Duty)– price of Imported material
V＝ price of foreign end products—foreign material price
Under a certain nominal tariff rate,the lower the nominal tariff rate
attached to raw material and medium goods,the more the
protection level to the end products
Economic effects of tariff
Solve problems of the influences on import price,
and welfare of import producer,consumer and
government,
1.Partial Equilibrium of small nation
PY
QYO
S
D
P w
P t
F
A
G
a b c d
Price in international
market
Price of imports after tax
① price increase
Q1 Q2Q3 Q4
Import before tax
② imports decrease after tax
e
B
C
H
③ loss of consumer is a+b+c+d
④ producer surplus is increased a
⑤ government tariff income is c
Loss,a+b+c+d（ Consumer）
Benefit,a（ producer） +c（ government）
⑥ net befefit,－（ b+d）
2.Partial equilibrium analysis of
large countries
PY
QYO
S
D
Pw
Pt
PW1
Pt1
Q1 Q3 Q4 Q4
a b c d
f
t
PW1,Imports of large countries decreases,international market price falls
Pt1,Domestic decreases after tax
Influence of tariff to some American products
( in Million dollars)
R u b b e r
shoes 41.9 -272.2 188.4 44.1 39.7Women
shoes 10.0 -325.1 253.4 54.6 17.1tile 19.1 -90.0 77.6 10.0 2.4
c a s e s 16.3 -186.3 139.8 36.4 10.1
Leather
g l o v e s 15.3 -28.1 15.0 10.8 2.2China 14.2 -43.8 33.3 9.2 1.3
Pottery 9.4 -34.7 33.7 0.8 0.2
bags 12.5 -134.4 103.4 25.7 5.3
Artificial
j e w l r y
9.9 -86.7 59.5 20.7 6.5
12.9 -185.8 99.0 77.2 9.6
Bicycle 11.0 -38.1 26.4 10.0 1.7
Product Tariff（ %） Consumer Cost Tariff Income ProducerIncome Net cost
Non trade barreiers
数
量
限
制
Import
Quota
Absolute
Quota
Tariff
Quota
Global Quota
Regional Quota
Importer Quota
Import
license
Voluntary
export restraint
Economic effects of import quota
O
P
QD
S
PW
PQ
Q1 Q3 Q4 Q2
a b c d
Situation of Import Quota
The voluntary export limitation
of Chinese products
VER
Chinese products that carry with quota
中国目前实施 配额管理 的产品
Policies aiming at improving export
E x p o r t
S u b s id y
出
口
补
贴
D i r e c t
Subsi dy
Indi r ect
subsi dy
世界各国的出口补贴
出口退税
口退税办法
Dumping
Economic
Effects P,C
QQ O
DF
MRF
MCMC
DD MRD
PF
PD
price discrimination 垄断企业
Foreign
markets
Domestic
market
Foreign markets has
more demand elasticity
than domestic marketDomestic price is
higher than price
in foreign
markets
China and Anti-dumping
Chinese-made television sets
Issues of China’s role as market economy
Latest cases
China’s implement of anti-dumping
Revolution of China’s foreign trade
,十一五规划纲要,
Chap 10,Economic Integration,
theory and practice
Forms of economic integration
Preferential Tariff Area
Free Trade Area
Customs union
Common Markets
Economic Union
Perfectly economic integration,？
Definition
of
WTO
Theory of customs union
T r a d e c r e a t i o n
Once the zollverein is set up,as tariff is cancelled,trade which
was formerly banned by tariff will generate
O Q
P
D
S
S1E
F
P0
P1 G
Q0 Q1Q2
After the cancellation of tariff,
foreign products are imported,
domestic supply increase to S1
Consumer surplus
increases P0EFP1
Producers surplus loses
P0EGP1
Net trade off
increase EFG
Imports
Trade diversion
Q1 Q2Q3 Q4O Q
P
D
S
PC
PB
PC+T a
b
c dh
PA
After integration,trade with non-members
will be transferred to member countries.
Q1Q2,Imports before
integration
Q3Q4,Imports of B
Consumer surplus after
integration increases h+c+a+d
Producer surplus decreases h
Tariff loss a+b
Net benefit,（ c＋ d）－ b
Economic Integration in
Europe
Economic Integration in Europe and
China-Euro Economic Relationship
Economic Integration
in Europe
China-Euro Economic
Relationship
China’s participation into International
Regional Economic Integration
上 海 合 作 组 织
CEPA
AP
EC
Construction of China-ASEAN Free
Trade Area
AS
EA
N
CAFTA
Yu
nn
an
an
d C
AF
TA
云南天然是中心
Free Trade Area between China and
other countries
China and Chile,2004年 12月举行第一轮谈判。 05年 9月
称取得重大突破。 11月 18日签署 FTA协定，从 2006年 7月 1日
开始，全面启动货物贸易的关税减让进程。其中，占两国税
目总数 97%的产品将于 10年内分阶段降为零关税。
China and Gulf countries,沙特阿拉伯、阿联酋、科威特、
阿曼、塔卡尔和巴林。 05年 4月第一轮谈判 。计划在 06年签
署 FTA
China and Pakistan, 05年 2月同意尽快在特惠贸易协议下
确定零关税产品。 4月，两国同意自 2006年 1月 1日起开始降
低双方贸易产品关税，并在 2008年 1月 1日前消除 2246种贸易
产品关税。 8月，宣布有望一年内结束 FTA谈判
04年 6月，同意启动中国与南部非洲关税同盟（ SACU，南
非、纳米比亚、博茨瓦纳、莱索托、斯威士兰） FTA谈判。
China and Korea,05年 3月就“启动中韩 FTA可行性和政策
提案民间共同研究”达成协议
China and India,05年 4月启动中印区域贸易安排可行性研
究
China and Iceland,05年 5月同意就两国间签署自由贸易协
议进行可行性研究。
China and Australia, 05年 5月正式启动谈判。 11月，第三
轮结束，完成第一阶段
China and New Zealand, 04年 12月启动谈判,05年 7月第
四轮。 12月 1日称第五轮取得进展。温家宝 06年 4月 10日在新
西兰访问期间表示，中国和新西兰自由贸易协定（ FTA）将
在两年内达成，这将是中国与发达国家签订的第一个自贸协
定。
Chap,12,WTO
Introduction （ p.184~194）
,Doha Round‖
C h i n a a n d W T O
