Case Study Of The Five Instruments Of Trade Policy
In this question the instruments of trade policy will be defined, followed by an explanation of each instrument from a theoretical perspective and relating it to the case study.
Instruments of Trade Policy
The increase in Foreign Investment and Global Market has resulted in governments formulating Trade Policies to protect the interests of politically important groups and the people of the country. (Melitz, 2012: 9-2)There are five Instruments of Trade Policy illustrated in the diagram below that will then be discussed.
Instruments of Trade Policy 1
According to Hill(2011) Tariffs are taxes levied on imports. The Government, Domestic Producers and employees of the protected industries keep their jobs. On the …show more content…
According to the case study the locals feel that the Government needs to make more capital available for small and medium enterprises especially in the agricultural sector and according to Hill(2011: 200) in most countries the agricultural sector seems to be the one of the largest beneficiaries of subsidies. The lack of support by the government is affecting the people of this region as well as preventing the economy from growing as a result of increased employments and non-mining investments and revenue
There also drawbacks associated with subsidies because an introduction or increase in subsidies will result in increased individual tax payments to the government.
2.3 Import Quotas and Voluntary Export …show more content…
Governments regulate and specify the quantity and type of goods that can be imported as well as the specific countries that goods can be imported from. (Hill, 2011: 201)
Voluntary Export Restraints refers to the quotas on trade forced by the exporting country either officially or unofficially. (Mancosa Guide)
This policy is aligned to protect local producers by restricting the import quantities and also preventing excess importing which in turn ensures better quality goods. (Mancosa Guide)
According to the case study the member states in this region do not impose any import quotas and export restraints. Free trade exists between the member states and no information regarding the import and export quotas so it probably an area that the region needs to look at and impose some sort of import quotas in foreign imports in order to protect the local market,
2.4 Local Content Requirements
This policy demands that a certain percentage of goods have to be produced locally with local raw materials and local labour. This policy therefore ensures skills retention, skills transfer as well as job retention. Technology is fast becoming a key player in production and this policy also demands technological advancements and transfer. (Mancosa