International business 5th griffin chapter 09

formulation of national trade policies international business, 5th edition chapter Chapter Objectives • Present the major arguments in favor of and against governmental intervention in international trade • Identify the advantages and disadvantages of adopting an industrial policy • Analyze the role of domestic politics in formulating a country’s international trade policies 9-2 Chapter Objectives • Describe the major tools countries use to restrict trade • Specify the techniques countries use to promote international trade • Explain how countries protect themselves against unfair trade practices 9-3 Issues on Trade Intervention • Should a national government intervene to protect the country’s domestic firms by taxing foreign goods entering the domestic market or constructing other barriers against imports? • Should a national government directly help the country’s domestic firms increase their foreign sales through export subsidies, government-togovernment negotiations, and guaranteed loan programs? 9-4 Free Trade or Fair Trade? Free Trade 9-5 Fair Trade Industry-Level Arguments National Defense Infant Industry Maintenance of Existing Jobs Strategic Trade 9-6 National Defense Argument • Country must be self-sufficient in critical raw materials, machinery, and technology or else be vulnerable to foreign threats • Appeals to general public • Protects steel, electronics, and machine tools industries, and merchant marines 9-7 Infant Industry Argument • Imposition of tariffs to give U.S firms temporary protection from foreign competition until firms are fully established • Powerful economic development strategy • Which industries should be protected? For how long? 9-8 Maintenance of Existing Jobs • Jobs in high-wage countries threatened by imports from low-wage countries • Forms of assistance – Tariffs – Quotas 9-9 Strategic Trade Theory Strategic trade theory suggests that a national government can make its country better off if it adopts trade policies that improve the competitiveness of its domestic firms in such oligopolistic industries 9-10 Map 9.1 An Effect of the Jones Act 9-15 Reasons for Tariffs • Tariffs raise revenues for national governments • Tariffs act as a barrier to trade 9-16 Tariff Barriers to International Trade Export tariffs Ad valorem Import tariffs Specific Compound 9-17 More than 300 workers lost their jobs when this Detroit auto plant closed 9-18 Figure 9.3 Impact of an Import Tariff on Demand for U.S.–Made Minivans 9-19 Nontariff Barriers • Quotas • Numerical export controls • Product and testing standards • Restricted access to distribution networks 9-20 • Public-sector procurement policies • Regulatory controls • Currency controls • Investment controls • Local-purchase requirements Figure 9.4 Tariff Rate Quota on Widgets A tariff rate quota imposes high tariff rates on imports above the threshold level 9-21 These Indian sugar cane workers receive less for their crops because of the tariffrate quota imposed by the U.S 9-22 Forms of Nonquantitative NTBs • Product and testing standards • Local-purchase requirements • Restricted access to distribution networks • Regulatory controls • Public-sector procurement policies 9-23 • Currency controls • Investment controls Figure 9.5 Types of Barriers to International Trade 9-24 Promotion of International Trade Subsidies Foreign Trade Zones Export Financing Programs 9-25 Map 9.2 Foreign Trade Zone on Mauritius 9-26 Controlling Unfair Trade Practices • International Trade Administration (ITA) – Division of U.S Department of Commerce – Determines whether an unfair trade practice has occurred – Confirmed cases transferred to U.S International Trade Commission (ITC) • Two types of unfair trade practices – Government subsidies – Unfair pricing practices 9-27 Controlling Unfair Trade Practices Countervailing Duties 9-28 Antidumping Regulations Objectives of Unfair Trade Practice Laws • Promote global efficiency by encouraging production in those countries that can produce a good most efficiently • Ensure that trade occurs on the basis of comparative advantage, not the size of government subsidies • Protect consumers from predatory behavior 9-29 ... formulating a country’s international trade policies 9-2 Chapter Objectives • Describe the major tools countries use to restrict trade • Specify the techniques countries use to promote international trade.. .Chapter Objectives • Present the major arguments in favor of and against governmental intervention in international trade • Identify the advantages... 9-23 • Currency controls • Investment controls Figure 9.5 Types of Barriers to International Trade 9-24 Promotion of International Trade Subsidies Foreign Trade Zones Export Financing Programs 9-25