IB - Chap 9

International Business
 Chapter 9: Formulation of National

Trade Policies; Griffin
Trade Intervention
Free trade or Fair trade

????????????
2
Trade Intervention
 Free trade implies that the national government exerts
minimal influence on the exporting and importing
decisions of private firms and individuals.
 Fair trade, sometimes called managed trade, suggests

that the national government should actively intervene to
ensure that domestic firms’ exports receive an equitable
share of foreign markets and that imports are controlled
to minimize losses of domestic jobs and market share in
specific industries.
3
Rationales for Trade Intervention
A. Industry Level Argument

1. The National Defense Argument
2. The Infant Industry Argument
3. Maintenance of Existing Jobs
4. Strategic Trade Theory
B. National Trade Policies

1. Economic Development Programs
2. Industrial Policy
3. Public Choice Analysis
4
 The national defense argument holds that a
country must be self-sufficient in critical raw
materials, machinery, and technology or else
be vulnerable to foreign threats
5
 A young nation’s manufacturers should be
protected by government otherwise it will not
survive their infancy and adolescence
because of fierce competition from more
mature firms
6
 Well-established firms and their workers,
particularly in high-wage countries, are often
threatened by imports from low-wage
countries.
 To maintain existing employment levels,

governments should take steps to relax them
from foreign competition.
7
 Strategic trade theory suggests that a
national government can make its country
better off if it adopts trade policies that
improve the competitiveness of its domestic
firms in oligopolistic industries.
8
Nuclear plant design
9
10
Rationales for Trade Intervention
A. Industry Level Argument

B. National Trade Policies

1. Economic Development Programs
11
1. Economic Development
Programs
 Countries that depend on a single export
often choose to diversify their economies to
reduce any negative impact, for example, a
bad harvest or falling prices for the dominant
export.
12
 Often government of a country determines
which industries should receive favorable
governmental treatment
 By adopting industrial policy, national

government identifies key domestic industries
critical to the country’s future economic
growth and then formulates programs that
promote their competitiveness.
13
 Domestic trade policies that affect
international business stem from the
mundane interaction of politicians trying to
get elected. And who elects the politicians?
The people in their legislative districts.
14
Barriers to International Trade
 Tariffs – Tax placed on a good that is traded
internationally.
Ad valorem tariff: Assessed as a percentage of the

market value of the imported good.
Specific tariff: assessed as a specific amount per

unit of weight or other standard measure.
Compound tariff: mix of both ad valorem

component and specific component.
15
Reasons for Imposing Tariffs
1. Tariffs raise revenue for the national government.
Customs duties are reasonably easy to collect. Further,
imported goods tend to be purchased by the wealthier
members of society, so heavy reliance on import tariffs
adds progressivity to the domestic tax system.
2. A tariff acts as a trade barrier. Because tariffs raise the

prices paid by domestic consumers for foreign goods,
they increase the demand for domestically produced
substitute goods.
 Nontariff Barriers
Nontariff barriers are the second category of
governmental controls on international trade. Any
government regulation, policy, or procedure other than
a tariff that has the effect of impeding international
trade may be labeled a nontariff barrier (NTB).
There are three kinds of NTBs:

1. Quotas
2. Numerical export controls
3. Other NTBs. (See next slide)

 Other NTBs.
Product and testing standard
Restricted access to distribution networks
Public sector procurement policies
Local purchase requirements
Regulatory controls
Currency controls
Investment controls
18
Promotion of International Trade
1. Subsidies
 Countries often seek to stimulate exports by offering subsidies
designed to reduce firms’ costs of doing business.
2. Foreign Trade Zones

 A foreign trade zone (FTZ) is a geographic area in which imported
or exported goods receive preferential tariff treatment
3. Export Financing Programs

 Most major trading countries have created government-owned
agencies to assist their domestic firms in arranging financing of
export sales, both large and small
19
Controlling Unfair Trade Practices
1. Countervailing Duties
A countervailing duty (CVD) is an ad valorem tariff on
an imported good that is imposed by the importing
country to counter the impact of foreign subsidies.
2. Antidumping Regulations
Dumping can occur when a firm sells its goods in a
foreign market
 At a price below what it charges in its home market
 Selling its goods below cost in the foreign market
Antidumping laws protect local industries from
dumping by foreign firms
20

IB - Chap 9

Uploaded by

Copyright:

Available Formats

IB - Chap 9

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IB - Chap 9

Uploaded by

Copyright:

Available Formats

International Business

 Chapter 9: Formulation of National

Free trade or Fair trade

 Fair trade, sometimes called managed trade, suggests

A. Industry Level Argument

B. National Trade Policies

 To maintain existing employment levels,

A. Industry Level Argument

B. National Trade Policies

 By adopting industrial policy, national

Ad valorem tariff: Assessed as a percentage of the

Specific tariff: assessed as a specific amount per

Compound tariff: mix of both ad valorem

2. A tariff acts as a trade barrier. Because tariffs raise the

There are three kinds of NTBs:

2. Numerical export controls

3. Other NTBs. (See next slide)

2. Foreign Trade Zones

3. Export Financing Programs

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.