Handbook on International Trade Policy
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Handbook on International Trade Policy

Edited by William A. Kerr and James D. Gaisford

The Handbook on International Trade Policy is an insightful and comprehensive reference tool focusing on trade policy issues in the era of globalization. Each specially commissioned chapter deals with important international trade issues, discusses the current literature on the subject, and explores major controversies. The Handbook also directs the interested reader to further sources of information.
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Chapter 21: Export Taxes: How They Work and Why They Are Used

Ryan Scholefield and James Gaisford


Ryan Scholefield and James Gaisford Introduction Governments use a variety of trade policy instruments to affect cross-border trade flows. This chapter examines export taxes. An export tax is a tax or tariff that a domestic country imposes upon its own products before they are shipped abroad. In addition to enabling a domestic government to collect revenue on exports, an export tax drives the domestic price below the world price. There are numerous political motivations for imposing export taxes, which tie in with the reduction in the domestic price change, and a potential national welfare rationale for export taxes, which is associated with a possible increase in the world price. We begin with a general theoretical overview of how an export tax works. As in the case of import tariffs, which were discussed in several preceding chapters, the impact of an export tax on national welfare depends on whether a country is large enough to have some influence upon the world price or whether it is sufficiently small that its effect is negligible. Consequently, for countries that are able to affect the world price, there is an optimum export tax, which is analogous to the optimum import tariff. Regardless of whether an export tax affects the world price, the decline in the domestic price creates winners and losers in the domestic economy. We provide a simple example of such winners and losers using a standard two-factor, two-good (Heckscher-Ohlin) framework where the StolperSamuelson Theorem...

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