The World Trade Organisation (WTO) is founded on the principles of national trea

Question

The World Trade Organisation (WTO) is founded on the principles of national treatment and non-discrimination.

(a)    Explain briefly what is meant by national treatment and non-discrimination.

(b)    Tariffs, a tax on the value of imports, and quotas, typically a restriction on the quantity of imports, are popular tools for restricting trade and protecting domestic industries. Why is a tariff generally preferable to a quota? (Hint: a microeconomic supply and demand diagram may help.)

(c) New Zealand and Australia can both produce two outputs, wheat and sheep meat. The UK is more efficient at producing both goods, and can produce 9 tonnes of wheat or 3 tonnes of sheep meat per person. New Zealand can produce 6 tonnes of wheat or 1 tonne of sheep meat per person. Both countries have a working population of 100 people, and without trade each has 50 people in the wheat industry and 50 people in the sheep meat industry.

Are there any possible gains from trade? Use a suitable diagram to support your answer.

Explanation / Answer

a) National treatment is a basic principle of GATT/WTO that prohibits discrimination between imported and domestically produced goods with respect to internal taxation or other government regulation

b) Tariffs are preferred over Quotas because of following reasons:

1. Tariffs generate revenue.

2. Quotas might promote corruption.

3. Quotas might encourage smuggling.

c.Hence, New Zealand signing agreeent of trade with Chile would mean referring to the rule of non-discrimination against Australi

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.