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Flashcards in Trade Policies Deck (13)
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1

Impact of Trade Policies (4)

Consumers:
-limit amount of available products

Workers:
-Short term: keep/loose of job
-long term: dependence on other markets

Government

Foreign businesses

2

Why is trade not free (name 3)

Taxation
- National defense
- Retaliation
- Infant industry
- Unemployment
- Corporate lobbying
- Human rights, environment
and public health

3

Instruments of Trade Policies (6)

-Tariffs
- Subsidies
- Import Quotas and Voluntary Export Constraints
- Local Content Requirements
- Administrative Policies
- Antidumping Duties

4

Tariffs

Higher prices on foreign products so people choose domestic products:
+good for domestic producers
-bad for consumers (less choices)

5

different kinds of tarrifs

specific:
-fixed charge per unit ( e.g. 5$ per product)
ad valorem:
- proportion of the goods value ( e.g. 4%)
compound:
- sepcific + ad valorem

6

What is a harmonized system HS (tariff schedule)?

international nomenclature of WCO for preparation of national tariff conditions; every country has its own terms for different products

7

How many digits has the HS in the USA?

8

8

Subsidies

Direct:
-Payments to reduce costs
Indirect:
- Tax breaks
- Loans
- Public/private partnerships
- Insurance
- Efforts to keep currency low

9

Import Quotas and voluntary Export Restraints

Import Quotas:
- Direct restriction on the quantity of a good that can be imported to a country
Voluntary Export Restraints (VER):
- Quota on trade imposed by the exporting country at the request of importing countrys government. (Lobbyism)

--> raises domestic prices of imported goods --> hurt people, helps producers

10

Local Content Requirement

requires some specific fraction of a good to be produced domestically in exchange of lowering or eliminating other trade barriers
-percentage of component parts
-percentage of value of goods

Example: "Buy local" legislation
--> preferences for domestic products (fly american act)
Problem: not always the cheapest choice

11

administrative trade policies

Legal and procedural barriers designed to make difficult
for imports to enter a country (for ex. national security concerns)

12

Antidumping Policies

Dumping:
- selling goods in foreign market below production cost/ below fair market value
--> Antidumping policies punishs foreign companies for that

13

How should an international business react to trade policies

short term:
-diversify to manage risk
-lobby
long term:
-support World trade organization and regional trade