em đang có 1 bài tập về dịch thuật anh văn bộ môn kinh tế quốc tế , nhưng đang bí ở 1 số đoạn , các anh chị có ai có thể giúp thì giúp dùm em với ah, những dòng màu ĐỎ em bí không tìm ra câu văn sao cho sát nghĩa được ah, giúp em với nếu mấy chị có thể dịch ah , em cám ơn nhiều ah 18.3 SUBSTITUTION IN CONSUMPTION The implications of the highly specific assumption of zero substitutability between goods are demonstrated in Figs. 18.1 and 18.2, where the costs of commodity X are now measured relative to commodity Y .In order to simplify the analysis, we now assume that Country A cannot produce commodity X at all but must import it from B or C. Thus, for Country C, the relative cost of X in terms of Y is represented by the line AC, and for Country B it is represented by the line AB. Suppose preferences for consumers in Country A are represented by isoquants such as Io, implying that consumption must always be along the line OZ. With free trade, Country A would purchase commodity X from Country C and would consume at point E. Any tariff on X rotates the price lines AC and AB around A toward the horizontal axis as the relative price consumers pay for imports from either B or C increases. (Only the tariff-inclusive price line of C,AC', is shown.). After the tariff is imposed, consumers will import X at the tariff-distorted price of AC'. However, imports will lead to tariff revenues, which will shift out A’s relative cost of importing X to A*C*. In other words, following the imposition of tariff, consumption remains at point E in Fig.18.1 because imports from C remain cheaper than those from B, and the supplement to income of tariff revenue allows consumers to continue choosing E. Now suppose Country A forms a free trade area with Country B while maintaining its tariff on Country C. This causes consumption to shift to point F in Fig. 18.1 because consumers can now buy imports more cheaply from B than they can from C. The free trade area has led trade to be diverted from C to B, and this trade diversion has resulted in a welfare loss. Note that if the initial tariff had been small enough to leave the distorted price line for imports from C to the right of AB, forming the free trade area would not have changed the pattern of trade. The result of Fig. 18.1 depends on the fact that the indifference curves are rectangular, or in other words, that they exhibit zero elasticity of substitution. Fig. 18.2 proves this by representing the same situation except with indifference curves that illustrate substitution in consumption. With free trade, consumption will take place at E. The imposition of a tariff that increases the domestic price ratio to p will move consumers to point H, where there is a tangency between this new domestic price line and the highest indifference curve along the terms-of-trade line AC. Now consider the formation of a free trade area between countries A and B. With the tariff still imposed on C, domestic consumers will buy X from B at the price ratio line AB and will thus consume at point K. Point K, because it is on the same indifference curve as point H, implies that the formation of a free trade area has neither reduced nor improved welfare, even though the free trade area has been trade-diverting. Of course, this is a very special case, but the point is that the relative cost ratio for Country B could lie either above or below AB. Therefore, there is no clear presumption that trade diversion is either welfare-improving or welfare-reducing. With substitution in consumption, a country in a free trade area that diverts trade to a less efficient producer could actually increase its welfare. Note, however, that the optimum scenario in terms of this model is free trade, moving consumption back to point E. A free trade area with B represents a second-best solution in this example, whether the trade diversion increases or reduces welfare relative to point H. 18.4 A HECHSCHER-OHLIN APPROACH In the last section, we relaxed the assumption that there was no substitution in consumption but retained the assumption that the production possibility curve was linear. We now examine the effects of trade creation and trade diversion in the traditional Heckacher-Ohlin-type model with a production possibility curve illustrated by TAT’ in Fig. 18.3. With free trade, production is at A and consumption at C0, so that the price line p represents the terms of trade with Country C. With a tariff, production would move to Q with consumption at C1. The question now is whether a free trade area with Country B, with a relatively higher price of X than exists in Country C, could make the domestic economy better off than the tariff-ridden situation of C1. The answer clearly depends on the price line in B. Suppose the domestic economy could buy from B at the price ratio p'. This price line passes above C1 and thus necessarily intersects the indifference curve tangent to p1 at C1. The equilibrium consumption point for p' must, therefore, be on a higher community indifference curve. The switch from trading with Country C to trading with Country B at prices p' is an example of trade diversion; thus it is again clear that trade diversion may be welfare-improving. It is interesting to note in Fig. 18.3 that trade diversion may improve welfare whether or not there is substitution in consumption, the very situation that allowed trade diversion to improve welfare in Fig. 18.2. This can easily be seen by supposing, in Fig. 18.3, that community indifference curves are rectangular as in Fig. 18.1. Even in this case, as long as the terms of trade p' with partner B pass above point C1, the establishment of the free trade area will be welfare-improving. Thus, it is clear that predicting a welfare loss from trade diversion depends on the conditions of no substitution in consumption and a linear production possibility curve. Fig. 18.4 represents the same free trade situation of Fig. 18.3, but it assumes that when a tariff is imposed, the terms of trade with the rest of the world are improved to p" with consumption point C 1. This situation, in which a tariff increases welfare by improving the terms of trade, is an example of the optimum tariff discussed in Chapter 15. Again it is assumed that, in the initial tariff situation, trade takes place with Country C. We now ask whether a free trade area with Country B could be welfare-improving. The answer is clearly no. Indeed, if the situation of Fig. 18.4 represents the optimum tariff, then no alternative trade agreement of any kind, including free trade, could make the country better off. In other words, if we are already pursuing the optimum policy, then no change, whether trade-diverting or trade-creating, could possibly make us better off. The only exception to this is if A and B join together in a customs union with a common external tariff against the rest of the world. In such a case, there is the potential that the joint market power of A and B could lead to an even greater, shared welfare gain from the imposition of a joint tariff. This is essentially what the Oil Producing Exporting Countries (OPEC) managed to do in the early 1970s by raising the world price of oil. Kemp and Wan (1976) provide a convincing argument that any sort of customs union, if properly defined, can be welfare-improving. Their argument runs as follows. Consider a situation in which any number of countries in a group, M, produce and exchange any number of commodities, N, and in which each country is allowed to have any kinds of tariffs, domestic taxes, or other distortionary policies. Now consider the possibility that some subgroup of these countries, S, forms a customs union. Suppose it is actually possible to combine this subgroup S into a single economy whose resources are equal to the sum of those of the individual subgroup members. Suppose further that this fictitious single country is now faced with the same excess demands and supplies that faced subgroup S before the union. The question now is whether this new economy can organize itself in such a manner that individual consumers are better off than they were before the union. Unless the initial situation happened to have been the optimum, the answer is yes. After all, given the same excess demands and supplies from foreigners, and given that the initial situation contained distortions, a preferred equilibrium position will clearly exist. Note finally that to ensure that the same excess demands and supplies face the new union, a system of external taxes, subsidies, and so on can be defined that maintains the initial world terms of trade for all commodities. The situation described earlier would almost certainly involve redistri-butions of income among consumers and, more importantly, would probably involve redistributions among countries. Thus, ensuring that this customs union will be welfare-improving would almost certainly involve interna-tional transfers, transfers that might well be difficult to implement in practice. It is also clear that the conditions facing the customs union among the S countries described previously must also apply to S + 1 countries, and so by logical extension, we would end up with free trade. It is interesting to note that this argument leads back to the classical proposition that a customs union, because it moves us closer to free trade, is presumed to be welfare-improving. We have seen that while this is not generally true, the appropriate kinds of redistributions, some of them international in nature, can give any customs union the potential to improve the welfare of member nations.
