Lecture 8
TARIFF
Tariff
Taxes on imported goods for the p g purpose of raising their price to reduce competition for local producers or stimulate local production. An import duty levied as a percentage of the invoice value of imported goods A fixed sum levied on a physical unit of an imported good
Th when nations use these non-tariff Thus h ti th t iff barriers, they can influence the price which eventually influences the demand supply.
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Lecture 8
IMPORT QUOTAS
Import quotas directly restrict the quantity of some good that may be imported into a country. country This may be done through issuing licenses to firms that import. A quota rent is the extra profit that producers make when supply is artificially limited by an import quota. Import quotas benefit domestic producers by limiting import competition, but they raise the prices of imported goods because quantity demanded will exceed quantity supplied.
ADMINISTRATIVE POLICIES
Administrative or bureaucratic trade polices are bureaucratic rules that are designed to make it difficult for imports to enter a country.
Examples include, safety requirements, q quality assurance, customs regulations, y , g , meeting religious requirements, delays, formalities, etc. These policies can act as a form of protection and trade restriction.
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Lecture 8
Exchange Controls
Controls on the movement of capital in and out of a country, sometimes imposed when the country faces a shortage of foreign currency.
Clothing textiles (fabrication of cloth) and apparel (assembly of cloth into clothing) Automobile (manufacturing resources such as steel, glass, etc) Electronics (Electrical and technology products for industrial usage)
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Lecture 8
ANTI-DUMPING
Dumping refers to selling goods in a foreign market below their costs of production, production or selling goods in a foreign market below their fair market value. Dumping enables firms to unload excess production in foreign markets. Antidumping polices (or countervailing duties) are designed to punish foreign firms that engage in dumping and protect domestic producers from unfair foreign competition.
SUBSIDIES
Subsidies are government payments to domestic producers. They can be in the o o form of:
Subsidies help domestic producers in two ways:
Help compete against l t foreign imports t low-cost f i i Help them gain export markets
Cash grants, Low-interest loans, Tax breaks or Government equity participation in the company
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Lecture 8
Government procurement
Government agencies are obligated to purchase from domestic suppliers, even when they charge higher prices (or have inferior quality) compared to foreign suppliers.
Domestic Politics
Governments do not always act in the national interest when they intervene in the economy, and are usually influenced by politically important interest groups
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