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Trade protectectionism (Economic Relationships with other countries (Price…
Trade protectectionism
Conflicting results of trade policies
The role of STAKEHOLDERS
Political policies and legal practices
Cultural values, attitudes and beliefs
Economic forces
Geographic influence
The role of consumers
Buy the best product they can find for the price
Without knowing or caring about the origin of the product
Economic rationales for governmental intervention
Fighting Unemployment
Unemployed more effective pressure group
Protecting "infant industries"
Underlying assumptions
Operating costs for an industry in a given country may be so high --> noncompeti- give output in world markets.
The industry’s government needs to protect it long enough
The govern- ment can then recoup the costs of trade protection through benefits
Risk in Designating Industries
Create internationally competitive products: 2 risks
Determining Probability of Success
governments: identify industries --> probability of success
The security of government protection
Who Should Bear the Cost?
DevelopIng an Industrial Base
Surplus Workers
Unemployment: significantly reducing agricultural output
Investment Inflows
Import substitution and export-led development
Growth in manufactured goods
Diversification
Price variations --> uncontrollable factors
Nation Building
The U.S.–Vietnamese Catfish Dispute
Catfish: 6th most consumed product in the world
10 000 employers
Vietnam advantages
Climate
No restrictions
Labor rates are lower in Vietnam
Economic Relationships with other countries
Balance-of-Trade adjustments
Trade deficit -> problems for nations with low foreign exchange reserves
If balance of trade difficulties :government may act to reduce imports
Balance of trade difficulties: encourage exports
Comparable access or “Fairness”
Companies:same access to foreign markets as foreign industries and companies have to theirs
Fairness
Restrictions as a bargaining Tool
Danger : country then escalates its restrictions
Price control Objectives
Countries: withhold goods from international markets -->to raise prices abroad
Development of technology
Export controls --> ineffective for digital products
Greater supply drops local prices beneath those in the inten- tionally undersupplied world market
If foreign producers will price their exports so artificially low
Foreign producers may be shifting their countries’ unemployment abroad
If high entry barriers --> exorbitant prices once their competitors go out of business
Encourages smuggling
NoneconomIc rationales for government intervention
Maintaining essential industries
Governments apply trade restrictions
Promoting acceptable practices abroad
National defense arguments to prevent the export
Limit trade to promote changes in a foreign country’s policies or capabilities
The rationale is to weaken the foreign country’s economy
Preserving national culture
They prohibit exports of art and historical items--> part of their national heritage
Instrument of trade control
Tariffs
Affect prices
Tax levied on a good shipped internationally
Export tariffs-->collected by the exporting country
Import tariffs raise the price of imported goods-->tax on them
Tariffs--> governmental revenue
NonTariff Barriers
Direct Prince influences
Subsidies:form of direct assistance to companies to boost competitiveness.
Governments also give aid and loans to other countries
Customs valuation tariffs for imported merchandise depend on the product, price, and origin
Quantity Controls
Quotas: limiting the quantity of a product that can be imported or exported in a given time
“Buy local” legislation: governments favor domestic producers.
Standards and labels
Specific permission requirements:Some countries require that potential importers/exporters secure governmental permission before transacting trade.
Administrative delays
reciprocal requirements
Dealing with governmental trade influences
Tactics for dealing with import competition
Involving the industry and Stakeholders
Convincing decision markers
Preparing for changes in the competitive environment
Singapour Government example
The Government offers a pro-business environment
Robust ecosystem to promote international trade and investments
Promote economic growth and create jobs
Develop a globalized, entrepreneurial and diversified economy