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International Business

International Business . Chapter Seven Governmental Influence on Trade. Conflicting Results of Trade Policies. Why governments intervene? - Governments intervene trade for the good of the citizens (or, does it really?) - Arguments for and against trade policies

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International Business

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  1. International Business Chapter Seven Governmental Influence on Trade

  2. Conflicting Results of Trade Policies Why governments intervene? - Governments intervene trade for the good of the citizens (or, does it really?) - Arguments for and against trade policies Protectionism refers to those government restrictions and incentives specifically designed to help a county’s domestic firms compete with foreign competitors at home and abroad. Protectionist measures are likely to lead to retaliation by affected stakeholders.

  3. Why Governments Intervene in Trade

  4. 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 tariffis 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

  5. 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

  6. Effect of Nontariff Barriers

  7. 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

  8. Chapter 7: Discussion Questions • Explain the rationale for and against governmental intervention in trade. OR • What is protectionism? What are the arguments for and against protectionism? • How governments intervene trade with the help of non-tariff barriers? Explain. • What are the effects of subsidies (or quotas) on price, production, market, motivation and trade? Explain. • What measures firms can take to deal with governmental intervention? Explain.

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