2.02 Exemplify how and why nations develop trade barriers and support export activities

1. 2.02 Exemplify how and why nations develop trade barriers and support export activities http://www.cbsnews.com/video/watch/?id=10289244n Protectionism

2. Why limit international trade? • Trade barriers - government placed restrictions • Infant industry argument - based on idea that developing/emerging industry needs time to become globally competitive • Ex) In 1980’s Brazil tried to protect new computer industry against imported computers. • Question - how long protection should be kept in place?

3. Why limit international trade? (con’t) • National security argument - based on idea that a country does not want to become dependent upon other countries for products • Ex) Japan restricts import of foreign rice at low market prices to protect domestic rice farmers – it does not want to be dependent upon other countries for this main food source.

4. Why limit international trade? (con’t) • Free trade favors rich countries argument – based on idea that large, developed countries have comparative advantages in many areas. • Canadians wary of US dominating their media market. • France has worked to protect its TV and film industry from US domination

5. Commercial Policies • Commercial policies - regulations & restrictions countries use to control international trade. • Tariff (customs duty) –tax placed on imported/ exported products; one of most common tools to control trade. It also is a source of revenue • Import tariff – taxes placed on goods coming into a country. • Ex) The Philippine government placed tariffs on imported Harley-Davidson motorcycles to protect their domestic motorcycle industry. • Ex) US has put 300% tariff on certain varieties of French cheese in the past. • http://www.dailymotion.com/video/xfxlcn_french-farmers-raise-stink-over-u-s-tariff-on-roquefort-cheese_news • CBC news clip LNWorking

6. Commercial Policies (con’t) • Tariffs help ensure imported products not sold for less than domestic products. • http://hts.usitc.gov/ - show duty on coffee, section 2, chapter 9 • Export tariff – taxes placed on goods leaving a country & often used as revenue • Used by countries such as Argentina, Indonesia & Malaysia for certain agricultural products. • US does not use export tariffs.

7. How an exporter can determine their product’s tariff in another country… • http://www.youtube.com/watch?v=B-hz9t6KTFQ • Video clip from International Trade Administration’s Free Trade Administration (FTA) tariff tool for exporters • Sweater activity…

8. Commercial Policies (con’t) • Import quotas – restrictions on amount of product that can be imported into country. • Ex) In 1981, Japan voluntarily restricted number of cars exported to the US. • Purpose was to give US automakers time to retool for production of fuel-efficient cars, but they used profits for other ventures. • Since there was not a limit on dollar value of exports, Japanese auto makers then exported larger, more profitable cars, & used profits to build car plants in US. • Ex) US sugar industry is presently protected by combination of tariffs & quotas.

9. Commercial Policies (con’t) • List of products/countries with quotas with Customs Border Patrol • http://www.cbp.gov/xp/cgov/trade/trade_programs/textiles_and_quotas/guide_import_goods/commodities.xml

10. Commercial Policies (con’t) • Embargo - ban of commerce & trade with another country or group for various reasons. • Ex) US presently has embargos against Cuba, Iran, Sudan and Syria • Ex) 1973 oil embargo by Organization of Arab Petroleum Exporting Countries (OPEC) • OPEC refused to sell crude oil to Europe & US • Gas prices increased from 38.5¢ to more than 55¢ per gallon • http://www.pmddtc.state.gov/embargoed_countries/index.html Embargo activity… • Assign country, find the effect date and what the embargo addresses. Present to class

11. Commercial Policies (con’t) • Boycott - type of embargo used by participants that believe an organization has done something morally wrong • Naturewatch has long-standing boycott against French multinational L’Oreal for continued use of animal testing for cosmetics • Vegetarians International Voice for Animals (VIVA) has boycott against German-owned Adidas for using kangaroo skins in some types of football boots • http://www.ethicalconsumer.org/LinkClick.aspx?fileticket=cOrT55txMvI%3d&tabid=123 • Boycott activity…use the above link for file

12. Commercial Policies (con’t) • Non-tariff barriers - often based on legislative rules & regulations related to product. • Ex) Europe requires GM food products be labeled as “genetically modified”. • Voluntary export restraints - limit the total amount of products exported. • Ex) China has voluntarily limited total amount of textiles exported to US. • Ex) Japan has voluntarily limited total number of cars exported to US

13. Commercial Policies (con’t) • Dumping - when countries export & sell their products for less than cost of production. • Ex) Japan & Brazil were accused of dumping steel in US. • Ex) China was accused of dumping steel fasteners in EU.

14. Commercial Policies (con’t) • Predatory pricing - lowering of price to gain market share. Dumping is type of predatory pricing. Ex) Products include steel, textiles, televisions, computers, hardware and farm crops. • Ex) China has been primary target for anti-dumping complaints. • International Trade Commission (ITC) – current investigations of dumping http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/active/index.htm#safeguard

15. Export Support Systems • Export support systems - developed by countries to encourage exporting • Indirect support activities used by governments to support sale of exports. • Special trade fairs & trade events. The US Commercial Service as part of US Department of Commerce, sponsors events for US businesses. http://www.export.gov/tradeevents/index.asp • Consulates are government appointed officials from one country that reside in another country to represent interests of appointing country’s citizens.http://www.usembassy.gov/ • http://www.state.gov/s/cpr/rls/fco/

16. Export Support Systems (Con’t) • Export subsidies - payments made by governments to support export of products • Direct export subsidies lower price of exported product & can include payments made directly to exporter by government. • Low interest loans may be offered by government • Used by US government and European governments for exported farm products

17. Export Support Systems (Con’t) • Indirect export subsidies - support exporting in roundabout way. • Boeing & Airbus receive help from their governments in research & development of their planes. • This lowers internal costs to companies helping to keep prices lower for their planes & to compete globally

18. Export Support Systems (con’t) • http://www.buyusa.gov/ • Home page of US Commercial Service, part of Dept. of Commerce • http://www.youtube.com/watch?v=JO7SHg25gpo&feature=relmfu • US Commercial Service – federal export support video

19. In Conclusion: • http://www.youtube.com/watch?v=RQjobBwvcUU • 5 minute clip on Customs Border Protection trade overview