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7 Cards in this Set
- Front
- Back
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Why Do Governments Intervene in International Trade?
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Every country intervenes in the flow of goods and services across its borders to:
Enhancing Employment: - Imports compete with local firms Retaliation: - Comparable or fair access to other country’s market Price Control Objectives: - Dumping restrictions |
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Reasons for Intervention in International Trade
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Industrialization argument:
- Agrarian economies need protection to industrialize (faster growth, more value-added) Essential Industry argument: - Protecting important national industries Infant-industry argument: - Need to protect industry for a period of time until it becomes more competitive over time Political objectives: - Economic relationships with other countries (friendly or unfriendly) Promoting Investment Inflows - If import restrictions keep out foreign-made goods, foreign companies may invest to produce in the restricted area Balance-of-Payments related objectives: - Import Substitution: policies emphasizing products to sell domestically - Export Promotion: policies emphasizing products to export |
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Forms of Trade Control: Tariffs
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Controls Price of goods
Tariffs (duties) may be levied On goods entering, leaving, or passing through a country - For protection or revenue - On a per unit or a value basis (ad valorem) Many more types of non-tariff barriers than types of tariffs |
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GATT
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was the world’s major trade-liberalization organization after WWII
- Multilateral negotiations with 120 countries - Eight rounds of negotiations - Monitored enforcement - Systematically getting bigger - Negotiate for given product category to reduce tariff - Takes a long time- all countries must agree - If rules are violated, there are no enforcements |
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Most-Favored-Nation Clause (MFN)
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if a tariff reduction granted to one MFN country, must be granted to all other MFN countries
Most countries still made exceptions to MFN, due to trade alliances or other reasons - Agreements must be extended to everyone, causing lower tariffs - Has become exclusive |
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WTO
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WTO created by the Uruguay Round 1986-1993, taking effect in 1995
Trade in services, not just goods Telecommunications and financial services Intellectual property rights Better settlement of disputes Reduced agricultural subsidies, textiles protection Criticisms: Labor, the environment, national sovereignty RECENTLY - China has been trying to get into WTO, and just got in 2003 because their Intellectual Property Laws were poor - Russia is still not a part of the WTO - WTO takes precedence over GATT |
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Forms of Trade Control: Non-Tariff Barriers
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Controls quantity of goods
import quotas to limit amount, Embargo: to eliminate export of item Subsidies or assistance to local firms Customs delays paperwork or red tape Imposition of “higher” standards “Buy Local” laws in favor of domestically produced goods, local content laws Reciprocal requirements for trade |
