Question

Question 2

(a) Discuss an optimum tariff as a concept.

(b) Discuss and compare the effects of a voluntary export restraint.

(c) Explain and evaluate dumping as a trade measure, especially taking into account who pays or benefits from dumping.

Answer 1

What happens actually is that these large countries do not become the only seller or buyer of the product, but they become the largest buyer of the product which gives them power to influence the global prices through tariffs because they know that foreign suppliers will go according to their wishes as they are the largest buyer if their product.

(b.)

(c.) Dumping means when in international trade, manufactures export a product to a foreign country at a price very less to the normal price with an injuring effect of it. The aim of this dumping is to gain more market share in the foreign market and to reduce the competition and thereby creating a type of monopoly situation in the market.

The only advantage here is to the manufacturers who are trying to eliminate the competition. Other than that there is a temporary advantage to customers as they get the product at a very low price, but it is only temporary.

Dumping has a very bad affect on the importing country's economy, hence every country has a strict anti dumping regulation. On a global level, WTO has an Anti Dumping agreement among the member nations. Other than that, importing countries have more stricter laws for anti dumping.