Unit 2

  1. Methods promoting international trade

Foreign Trade Zone: FTZ is a designated geographic region in which merchandise is allowed to pass through with lower customs duties (taxes) and/or fewer customs procedures.

Special Government Agencies: organize trips abroad for trade officials and businesspeople and open offices abroad to promote home country exports.

Export financing: Governments can offer export financing, including loans to exporters that they would not otherwise receive or loans at below-market interest rates. Governments can also provide loans guarantee, which means they will pay a company's loan if the company defaults on repayment.

Subsidies: A subsidy is financial assistance to domestic producers in the forms of cash payments, low-interest loans, tax breaks, product price support, and some other forms

  1. Reasons to create tariffs

Main reasons

Other reason

To encourage local production

To help local firms export and thus build worldwide market share

To encourage

To promote

To reduce

To protect

To prevent

local job by shielding home-country business from foregin competition

infant industries that are getting started

local product to replace imports

local and foreign direct investment

export activity

political objectives such as refusing to trade with countries that practice apartheid or deny civil liberties to their citizens

reliance on foreign suppliers

balance of payments problems

click to edit

  1. Barriers

Quantity limits: Quantity limits, often known as quotas, restrict the number of units that can be imported or the market share that is permitted.

International price fixing: Sometimes a host of international firms will fix prices or quantities sold in an effort to control price. This is known as cartel.

Price-based barriers: Imported goods and services sometimes have a tariff added to their price. Quite often this is based on the value of the goods. Tariffs raise revenues for the governments, discourage imports, and make local products more attractive.

Foreign investment controls: Foreign investment controls are limits on FDI or the transfer or remittance of funds by requiring foreign investors to take a minority ownership position or limiting profit remittance and prohibiting loyalty payments to parent companies.

Financial limits: One of the most common is exchange controls, which restrict the flow of currency.

4. Non-tariff barriers

Non-tariff barriers are rules, regulations, and bureaucratic red tape that delay or preclude the purchase of foreign goods.

click to edit

Customs valuation: Considerable progress has been made in the area of customs valuation for the payment of duties. Value for duty is now generally based on the invoice cost, and the latitude os any country's customs office to reclassify products has been reduced.

Techical barriers: Product and process standards for health, welfare, safety, quality, size, and measurements can create trade barriers by excluding products that do not meet them.

"'Buy national'" restrictions: Buy national restrictions require governments to give preference to domestic producers, sometimes to the complete exclusion of foreign firms.

Export restraints: Over the vigorous objections of countries exporting natural resources, the GATT (and WTO) rounds have moved to tighten the conditions under which exports can be restrained.

Quotas: Quotas restrict imports to a particular level. When a quota is imposed, domestic production generally increases and prices rise. As a result, the government usually ends up losing tariff revenues.

  1. Barriers

Quantity limits: Quantity limits, often known as quotas, restrict the number of units that can be imported or the market share that is permitted.

International price fixing: Sometimes a host of international firms will fix prices or quantities sold in an effort to control price. This is known as cartel.

Price-based barriers: Imported goods and services sometimes have a tariff added to their price. Quite often this is based on the value of the goods. Tariffs raise revenues for the governments, discourage imports, and make local products more attractive.

Foreign investment controls: Foreign investment controls are limits on FDI or the transfer or remittance of funds by requiring foreign investors to take a minority ownership position or limiting profit remittance and prohibiting loyalty payments to parent companies.

Financial limits: One of the most common is exchange controls, which restrict the flow of currency.