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Daniels15 06 Governmental Influence On Trade

International business

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135 views13 pages

Daniels15 06 Governmental Influence On Trade

International business

Uploaded by

Laraine Shawa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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International

Business
Environments & Operations
15e

Daniels Radebaugh Sullivan

Copyright 2015 Pearson Education, Inc. 6-1


Chapter 6
Governmental
Influence on Trade

Copyright 2015 Pearson Education, Inc. 6-2


Learning Objectives
Explain why governments try to enhance and
restrict trade
Compare the potential and actual effects of
government intervention on the free flow of trade
Illustrate the major means by which trade is
restricted and regulated
Demonstrate the business uncertainties and
opportunities created by governmental trade
policies
Discern how businesses may respond to import
competition

Copyright 2015 Pearson Education, Inc. 6-3


Introduction
Protectionism refers to those government
restrictions and incentives designed to help a
countys domestic firms compete with foreign
competitors at home and abroad.
Protectionist policies
negatively affect the ability of foreign
producers to compete in your home market
enhance your companys ability to sell abroad
or acquire needed foreign supplies
are likely to lead to retaliation by affected
stakeholders
Copyright 2015 Pearson Education, Inc. 6-4
Conflicting Results of Trade
Policies
Governments intervene in trade to achieve
economic, social, and political goals
Policymakers are challenged by
conflicting objectives
interest groups
Stakeholders include workers, owners,
suppliers, local politicians etc.
Consumers usually dont care or, have
very little say in the market

Copyright 2015 Pearson Education, Inc. 6-5


Economic Rationales for
Government Intervention
Why governments intervene in trade
Economic rationales
Fighting unemployment
Protecting infant industries
Promoting industrialization
Improving comparative position
Non-economic rationales
Maintaining essential industries
Promoting acceptable practices abroad
Maintaining or extending spheres of influence
Preserving national culture

Copyright 2015 Pearson Education, Inc. 6-6


Instruments of Trade Control
Tariffs (also called duties) are taxes levied on
(internationally) traded products.
Exports tariffs, transit tariffs, import tariffs,
levied by the country of destination on
imported products
A specific duty is a tariff that is assessed on a
per unit basis. An ad valorem tariff is assessed
as a percentage of the value of an item.
Nontariff barriers (NTBs) represent administrative
regulations, policies, and procedures, i.e.,
quantitative and qualitative barriers, that directly
or indirectly impede international trade.
Trade barriers have often been the sources of
conflict among nations and in WTO negotiations
7
Instruments of Trade Control:
Nontariff barriers (NTB)
Nontariff barriers (NTB): Direct Price Influences
Subsidies
Aids and Loans
Customs valuation
Nontariff barriers (NTB): Quantity Controls
Quotas: VER, Embargoes
Buy Local legislation
Standards and Labels
Specific permission requirements (license etc.)
Administrative delays
Effect of Nontariff Barriers
Effect on Subsidies Aids and Quotas Buy Local
Loans
Price

Production

Market

Motivation

Trade
What measures firms can take to deal
with governmental intervention

Move operations to lower-cost countries


Concentrate on market niches that attract less
international competition
Opt for internal innovations leading to greater
efficiency and/or superior products
Try to secure government protection

10
Dynamics and Complexity
Trade restriction changes bring about
winners and losers among countries,
companies, and workers
Gains to consumers from freer trade may
come at the expense of companies and
workers
The international regulatory situation is
becoming more complex

Copyright 2015 Pearson Education, Inc. 6-11


Chapter 6: Discussion Questions

1. What is protectionism? What are the arguments


for and against protectionism? I may ask you to
explain any specific rationale (e.g., infant
industry argument)
2. How governments intervene trade with the help
of non-tariff barriers? Explain.
3. What are the effects of subsidies (or quotas) on
price, production, market, motivation and trade?
Explain.
4. What measures firms can take to deal with
governmental intervention? Explain.

12
All rights reserved. No part of this publication may be reproduced, stored in
a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

Copyright 2015 Pearson Education, Inc. 6-13

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