Lecture International business - Chapter 6: Business-government trade relations

In this chapter, you will explore business-government trade relations. You will also: Examine the political, economic, and cultural reasons why governments intervene in trade; learn about the instruments that countries use to restrict and promote trade; and understand how the global trading system promotes trade.

ne b Special quota zone c Foreign trade zone Copyright © 2014 Pearson Education, Inc - 15 Answer to Discussion Question A geographic region within a nation and in which merchandise passes through with lower customs duties or fewer customs procedures is called a a No subsidy zone b Special quota zone c Foreign trade zone Copyright © 2014 Pearson Education, Inc - 16 Tariffs Government tax levied as a product enters or leaves a nation Potential results  Export tariff + Protect domestic firms  Transit tariff        from competitors +  Generate income for the        government  Import tariff –  Reduce competitiveness        of home­based firms –  Raise consumer prices Copyright © 2014 Pearson Education, Inc - 17 Import and Export Quotas Restriction on the amount of a good that can enter or leave a country during a certain period of time Import Quotas Export Quotas Protect domestic producers  Retain adequate domestic  Force outside firms to  Restrict world supply of a  of a good compete for market access Copyright © 2014 Pearson Education, Inc supply of a product product to raise its price - 18 How a Tariff­Quota Works Copyright © 2014 Pearson Education, Inc - 19 Embargoes Complete ban on trade (imports and exports) in one or more products with a particular country Most restrictive nontariff trade barrier Copyright © 2014 Pearson Education, Inc Often used to achieve political goals Can be difficult for a nation to enforce - 20 Local Content Requirements Laws that domestic market must supply a specific amount of a product Forces international companies to employ local resources in production process Copyright © 2014 Pearson Education, Inc - 21 Administrative Delays Regulatory controls or bureaucratic rules to slow imports into a country Copyright © 2014 Pearson Education, Inc  Inconvenient ports for imports  Product-damaging inspections  Understaffed customs offices  Lengthy licensing procedures - 22 Currency Controls Restrictions on the convertibility of a currency Limit the amount of  globally accepted  currency available to pay  for imports Set an unfavorable  exchange rate when  paying for imports Copyright © 2014 Pearson Education, Inc - 23 Discussion Question What are some of the methods that governments use to restrict international trade? Copyright © 2014 Pearson Education, Inc - 24 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 © 2014 Pearson Education, Inc - 32 ... Education, Inc - 28 World Trade Organization (WTO) Normal trade relations status Dumping and antidumping Dispute settlement body Doha trade talks Copyright © 2014 Pearson Education, Inc - 29 Discussion Question... Pearson Education, Inc - 23 Discussion Question What are some of the methods that governments use to restrict international trade? Copyright © 2014 Pearson Education, Inc - 24 Answer Discussion Question... Discussion Question The World Trade Organization principle that calls for nondiscrimination among trading partners is called a Least favored status b Normal trade relations c Countervailing relations Copyright