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Chapter 6
TRADE BARRIERS & REGULATIONBy Madelynn Esquivias, Hang Cui, & Leila Salarpour
Agenda
The Evolution of Trade3 Phases of Globalization
Protected TradePurpose
Customs ServicesTariffs & DutiesTrade Barriers
Trade AgreementsImplementation of Trade
BarriersQuick QuizLast Insight
The Evolution of Trade
ObjectiveExplore the evolution of the textile
and apparel trade (Kunz, 2011).
Discussion Question:
Looking at the three phases of globalization, what to do you think it means in terms of each globalization phase shrinking the world? How has each globalization phase shrunk the world?
Globalization 1.0 | Globalization of Countries
Great Britain | Dominant
Global Power(19th Century)
1801-1900
Golden Area | International Commerce
Civil War | Four Year War
1861-1865
Revolutionary War | American
War of Independence
1775-1783
Invention | Steamship, Railroad,
Telegraph, Telephone
Transatlantic Cable |
Connected 1866
Theory of Comparative Advantage|
David Ricardo1817
1400-18651866-1914 1915-1945 1946-1989 1990-2000 2001-2009 2010...
United States |
Dominant Power (20th
Century)1901-2000
Size Large
Size Medium
Globalization 2.0 | Globalization of Companies
1400-18651866-1914 1915-1945 1946-1989 1990-2000 2001-2009 2010...
World Bank | Est. 1944
World War I1914-1918
Keynesian Economics |
Solution to the Great
Depression1930s
Cold War |U.S. &
U.S.S.R.1941-1991
Development | Electronic
Communication & the Internet
1980-2000
The Great Depression 1929-1930s
World War II1939-1945
International Monetary Fund
(IMF) | 1945
GATT |Est. 1947Eff. 1948
Multifiber Arrangement (MFA) | 1974-
2004
Fall of
Berlin Wall |1989
Conversion | CWS → GS
Integration | GATT → WTOMFA → ATC
Invention | Computers, Satellites,
Microcomputers, fiber optics
United States |
Dominant Power (20th
Century)1901-2000
Size Medium
Size Small
Globalization 3.0 | Globalization of Individuals
1400-18651866-1914 1915-1945 1946-1989 1990-2000 2001-2009 2010...
Regionalization of Trade
Grew
Corporate Social
Responsibility (CSR)
Economic Downturn
Challenged World Market
Innovation Developing
SSC
Big Corporations| Domination of
Global Commerce
Outsourcing | White Collar
Jobs
Creativity & Innovation on Environmental Responsibility
Coalition to link public policy &
Corporate Responsibility
Size Small
Size Tiny
Discussion Question| The Evolution of Trade
Looking at the three phases of globalization, what to do you think it means in terms of each globalization phase shrinking the world? How has each globalization phase shrunk the world?
Protected Trade
ObjectiveExamine how trade barriers protect
trade (Kunz, 2011).
Discussion Question:
In terms of protected trades, what are the possible reasons the export and import policies of a nation may be different?
Purpose of Protected Trade
1. domestic market
2. make competition fairer
Trade Barriers
● All the domestic companies to charge higher prices, grow and increase the number of jobs offered, and make a greater contribution to the domestic economy
● some types of trade barriers are also used as an important source of government revenue.
Customs ServiceResponsibilities
monitor imports and exports
assess and collect duties
report imports and exports against quota
protect the country’s borders against illegal entry
To figure out the what, when and who of trading, a detailed accounting system is needed to record systematically the passage of products, and recording the amounts of specific types of products is a great challenge.
HS: Harmonized Commodity Description and Coding System
Monitor imports and exports
Harmonized Commodity Description and Coding System
Global classification system used to describe most trade in goods
WCO(World Customs Organization)-language of international trade.
Tariffs and Duties
Tariffs ●trade protection ●tariff schedule establishing the taxes that are collected as duties●imported or exported goods.
Nominal Tariffs ●rate●in each country’s tariff schedule●determine duty ●paid for specified products●2 forms: specific and ad valorem.
1. specific ● fixed amount money per physical unit of product ● easy to apply and administer, like standardized goods● provide a degree of protection that varies inversely with changes in
import prices.
1. ad valorem tariffs are like a sales tax● are a fixed percentage of the value of product● can be applied to products with a wide range of product variation● maintain a constant degree of protection, even when prices vary.
duty due=physical units of goods x specific duty rate$200=10,000ducks x $0.02 each
duty due=total value of the product x ad valorem duty rate$36,125=($340x1,250pcs of luggage)x 8.5%
total duty due=specific duty+ad valorem duty rate
Free Trade Zones
●trade agreements between countries that are designed to reduce trade barriers and facilitate trade.●A port or other site within a nation designated for duty-free entry of selected for manufacturing. ●Often established within individual nations that are just entering into competitive participation in global market.
Foreign trade zone
●a free trade zone that allows manufacturing for export. ●located in a single country, and goods move between countries with special treatment (including no duty assessed )●QIZ-qualified industrial zone, involves more than one nation,like Egypt, where manufacturing can take place.
Nontariff Trade Barriers
exchange rates●determine the ration at which one currency can be traded for another ●strong dollar and weak dollar
Quotas●restrict quantities of good that can be imported or exported but are most often applied to imports. ●often administered by a government that issues import licenses up to the quantity of imports that will be allowed.
Voluntary Export Restraints●gentlemen’s agreements to restrict trade, because the agreements are not formalized into international law.
Discussion Question| Protected Trade
In terms of protected trades, what are the possible reasons the export and import policies of a nation may be different?
Trade Agreements
ObjectiveIdentify major international trade
agreements and their intrinsic trade barriers, relevant to textiles and
apparel (Kunz, 2011).
Discussion Question:
What was Multifiber Arrangement (MFA) tend to do and why was it expired in 2005?
in the United States Implementation of Tariffs
1.The main goal of Tariff:
Was raise money to pay the federal budget.
2. Multifiber Arrangement (MFA):
The agreement imposed quotas on the amount that developing countries could export in the form of yarn, fabric and clothing to developed countries
Trade Agreements Cont.
1.General Agreement on Tariffs and Trade (GATT) (1947 to 1994):
GATT provided an international framework that established the ground rules for world wide trade to reduced trade barriers
2. World Trade Organization (WTO) (1994-Present):
WTO deals with the rules of Trade between nations at a global level.
Discussion Question| Trade Agreements
What was MFA intended to do and why was it expired in 2005?
Quick Quiz
QuizQ.1Who developed the Theory of Comparative Advantage?
Q.2 What is the purpose of protected trade?
Q.3What is the main goal of Tariff?
A.1 David Ricardo
A.2 Stronger domestic market (compete less with foreign companies in domestic market) &
make competition fairer (in international markets).
A.3 Raise money to pay the federal budget.
Given the commonality of global trade and travel, do you think the United States should take up using the metric system, like the rest of world? What might be the major barriers to the changeover to metric?
End
ReferencesKunz, G., & Garner, M. (2011). Trade Barriers and Regulations. In Going Global: The Textile and Apparel Industry (Second ed., pp. 171-194). New York: Fairchild Books.
Investopedia. (2015). Mixed Economic System. Retrieved fromhttp://www.investopedia.com/terms/m/mixed-economic-system.aspChanda, N. (April 7, 2004). Globalization has shrunk the world to size tiny. Yale Global Online. Retrieved from http://yaleglobal.yale.edu/content/globalization-30-has-shrunk-world-size-tiny