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Business Government & Trade Relations (Trade Restriction (Currency…
Business Government & Trade Relations
Cultural motives
To protect national identity
Nations block imports deemed harmful
E.g. Strict laws of western culture
harmful to young children/youths
E.g. China eases foreign film restrictions
E.g. French critic argue that allowing Hollywood movies
to compete against French films
will be destructive to culture in France.
Political motives
Protect Jobs
thus, gov intervene to protect domestic jobs against cheap foreign imports
Preserve national Security
country must be self-sufficient
or
else face vulnerability
to FOREIGN threats
E.g.
Japan Rice Policy ban exports of rice
or have export tariffs to discourage it
Respond to Unfair Trade
if other nations protect their own countries with these barriers
affected country: impose retaliatory measures
E.g. chinese coated paper
Dumping: predatory pricing
undercut manufacturers
benefit companies and unrival competitors
To gain influence
Larger nations use trade
Embargoes
to gain influence over smaller nations
e.g. Obama extend 50-year old embargoes against cuba in 2012
Economic motives
To protect
infant
industries
(from global competition)
Pro
results
National income increases
Cons
results
Wrong industries protected
firs grow complacent
consumer prices rise
public funds poorly spent
temporary protection
from foreign competition
till it can hold itself better
E.g. Proton Malaysia
received tax breaks and gov incentives
to pursue strategic trade policy
Definition
Oligopolistic
international market
creates economies of scale
a gov. policy which attempts to shift
excess profits in the market towards the
home country firms
Pro
results
Global industry created
Cons
results
Firms'efficiency reduced
domestic costs inc
special interests benefit
Trade Promotion
Subsidies
Pros
Increased competitiveness
encourage inefficient firms
Cons
inc consumer prices
overuse of resources
e.g. Eu uses 40% of annual budget to subsidise farmers
Export financing
financing low-interest loans and loan guarantees
Foreign Trade zones
to inc. employment and trade within the nation
e.g. Free Trade Zone
to facilitate international trade &
inc. global competitiveness
Special gov. agencies
Organize trade missions
for officials and businesses
operate export
-promotion offices at
locations abroad
help i
mport products
the home
nation does not produce
E.g. IE Singapore
help drive SG's EXTERNAL economy
Trade Restriction
Tariffs
Pros
Protect domestic firms from competitors
generate income for the gov.
Cons
reduce competitiveness
of home-based firms
raise consumer prices
Types
Ad valorem
based on value
Fixed (specific)
Compound
Valorem + specific
Alternate
Valorem + specific
instruction to pay: higher or lower amt
(Import & Export)
Quotas
restriction to the amt of good that enter/leave the country at any given time
Embargoes
complete a ban/trade towards a particular country
Local content requirements
laws that domestic producers
MUST supply a specific amt of good/service
forces international companies to employ local resources
Administrative delays
regulatory controls/bureaucratic rules to slow imports in2 country
Currency controls
limit the amt of globally accepted currency available to pay for imports/exports
set unfavourable exchange rate
banning use of foreign currency
within the country
E.g. China: Chinese citizens are not able to remit freely more than US$50,000 a year