International trade

A small open economy takes the world price \(p_w\) as given. Below the autarky price it imports the gap between domestic demand and supply; above it, it exports. A tariff or an import quota raises the domestic price and shrinks imports.

TradeScenario(
    world_price,
    tariff=0.0,
    import_quota=None,
    quota_rent_recipient=QuotaRentRecipient.DOMESTIC
)

quota_rent_recipientQuotaRentRecipient

Who gains the quota rent: DOMESTIC importers or GOVERNMENT (both count in national surplus; the government's share is reported as revenue), or FOREIGN exporters (it leaves the country).

The world price and at most one policy: a per-unit tariff or an import_quota, not both (PolicyError).

analyze_trade(
    demand,
    supply,
    scenario
)

domestic_price

Price in the home market.

quantity_demanded

Domestic quantity demanded at that price.

quantity_supplied

Domestic quantity supplied at that price.

imports

Quantity imported.

exports

Quantity exported.

direction

TradeDirection: IMPORT, EXPORT or AUTARKY.

consumer_surplus

Consumer surplus.

producer_surplus

Producer surplus.

government_revenue

Government revenue.

quota_rent

Rent created by a quota.

national_quota_rent

The part of the quota rent that stays in the country.

total_surplus

National surplus.

gains_from_trade

Gain over autarky.

is_policy_binding

Whether the tariff or quota changes the price.

Compare autarky, free trade and the policy. The TradeComparisonResult holds three TradeOutcomes, autarky, free_trade and policy, and the deadweight_loss of the policy relative to free trade.

from principle_viz import TradeScenario, analyze_trade

# autarky price 7
demand = line_from_inverse(12.0, -1.0)
scenario = TradeScenario(world_price=4, tariff=2)
result = analyze_trade(demand, supply, scenario)
print(result.free_trade.imports, result.policy.imports)
# 6.0 2.0
print(result.policy.government_revenue, result.deadweight_loss)
# 4.0 4.0

With the tariff of 2, the domestic price is 6 and government revenue is \(2 \times 2 = 4\). An import quota of 2 units gives the same price; the rent of 4 goes to the party named by quota_rent_recipient.

MarketFigure.add_trade(result)

Draw the world price line, named \(p_w\), the policy price (\(p_w + t\) or \(p_q\)), \(Q_s\) and \(Q_d\) on the quantity axis with an "Imports" or "Exports" brace beneath, and the tariff revenue or quota rent as a named rectangle (see Free trade with imports., An import tariff. and A binding import quota.).

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