2.02 Exemplify how and why nations

develop trade barriers and support export

activities

2.02Why do some Americans worry

about trading with China? American jobs are lost China protects domestic products

• Difficult for the United States to sell to China

• Apple, Facebook, Yahoo!, Cisco, Google, & Microsoft have all been targets of Chinese government

Manipulate currency rates• China prints more of its money & buys US dollars with it

• This increases the supply of its currency (Yuan)

• Keeps exports cheap but allows them to stockpile US dollars which in time creates issues

2.01

Practice Quiz available online via Edmodo Everyone needs to take it by Friday

Key terms Absolute advantage Comparative Advantage Opportunity cost Commodity Factors of production

• Natural, Human, & Capital

Agenda

15 minutes to finalize paper and submit via EdmodoIf done take the practice quiz for 2.01

2.02 notes & activity

Current Events

Workplace Concerns

https://www.youtube.com/watch?v=-FfIf24SET8

Do you think that employer’s should monitor social media sites of employees?

Why limit international trade?

Trade barriers – Government placed restrictions on trade

Three main reasons to implement trade barriers: Infant industry argument - based on idea that a

developing/emerging industry needs time to become globally competitive

• Allows new companies a chance to compete without the threat of International competition

• Once it becomes substantial; barriers are reduced

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

Japan taxes the import of rice to protect domestic farmers

Land in Japan could be used for other things; however, Japan would be reliant on other countries for its main food source

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

Review

Main reasons trade barriers are implemented:Protect select industries, interests, &

culture of country

Prevent rich countries from being too influential

Commercial Policies

When conducting business in another country you have to know the rules and regulations you will encounter

Know American policies plus countries you choose to do business with

Commercial policies - regulations & restrictions countries use to control international trade.

Tariffs Quotas Embargo’s Non-tariff barries

Types of Commercial Policies

Tariff Also known as a customs duty Tax placed on imported/exported products One of most common tools to control trade. Used as a source of revenue

Import Tariff Taxes on imported products Tariffs help ensure imported products are not sold

for less than domestic products.

Examples of American Tariffs

France refused to join the USA in its 2003 Iraq invasion

Bush Administration proposed 300% import tax on cheese

Stayed at 100% Same as oats, chocolates,

cured ham, and other European edibles

Roquefort cheese

Examples of American Tariffs

Most sold in the USA are manufactured in America

Why? 126.94% tariff tax on

Chinese manufactured paperclips

Paper Clips

Example of American TariffsTobacco

350% tariff

Canned Tuna

35% tariff

Non-American Shoe Companies

48% tax

New Balance is Boston-based

Peanuts

131.8% on shelled

163.8% on unshelled

Brooms

32%

Tires

35% on China

Examples of Tariffs

Where is the most expensive place to buy an Apple product?

The average Apple device is $1,348 in this country

German Cars in China

A BMW 650i

Sells for $91,000 in Germany

In China, it sells

for $_________326,000326,000

Commercial Policies (con’t)

Export tariff – taxes placed on goods leaving a country & often used as revenue

• Directly raise a products price

• Used by countries such as Argentina, Indonesia & Malaysia for certain agricultural products.

• US does not use export tariffs.

How an exporter can determine their product’s tariff in another country… http://www.youtub

e.com/watch?v=B-hz9t6KTFQ

Video clip from International Trade Administration’s Free Trade Administration (FTA) tariff tool for exporters

Commercial Policies (con’t)

Import quotas – restrictions on the amount of a product that can be imported into country. Protects domestic products by limiting competition

Downside of quotas is that limited competition can result in increased prices

Example of Import Quota• The United States & Sugar• World Price of Sugar is $.05 - $.13/lb• United States it is $.20 - $.24/lb• https://www.youtube.com/watch?v=fGOj8kBpsD4

Quota Example #2

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.

List of products/countries with quotas with Customs Border Patrol http://www.cbp.gov/trade/quota/guide-import-goods/commodities

Items subject to Quotas

Commercial Policies (con’t) Embargo - ban of commerce & trade with

another country or group for various reasons. USA presently has embargos against Cuba,

Iran, Sudan and Syria• https://www.youtube.com/watch?v=smS8KTs8rro

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

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

Commercial Policies

A Boycott is a type of embargoUsually occur when a county or company is

viewed has doing something morally wrong

http://listverse.com/2011/09/03/10-famous-boycotts/

Examples of Boycotts:International Buy Nothing Day

Black Friday boycott of over consumption in Western economies Canada & USA

Other countries it happens on Saturday

Abercrombie & Fitch

Abercrombie & Fitch

24 girls boycotted store in 2005 for their degrading slogans on shirts I had a nightmare I was a

brunette Who needs brains when

you have these

2002 - 2011

Male Shirts

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

Commercial Policies (con’t)

Non-tariff barriers – Barriers based on legislative rules &

regulations related to product.

Example• Europe requires GM food products be labeled as

“genetically modified”.

Commercial Policies

Voluntary export restraints - limit the total amount of products exported

• China has voluntarily limited total amount of textiles exported to US.

• Japan has voluntarily limited total number of cars exported to US

The United States has chosen to raise prices versus prepare for competition with these countries

Commercial Policies

Dumping: Occurs when countries sell products for less than the cost of productionForm of predatory pricingAttempt of Big Business to gain market share

• Detrimental to small businessChina is most commonly accused of this practice

• https://www.youtube.com/watch?v=SNf528GzJhI Anti-Dumping laws exist to guard against

• Tariffs & quotas are implemented

Assignment

Factors of production review of AK Be specific How is resource utilized

Infant Industry in America

Boycott Advertisement Assignment

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.

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

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/

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

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

http://www.boeing.com http://www.airbus.com http://www.businessweek.com/debateroom/archives/

2007/10/airbus_subsidie.html http://www.govexec.com/dailyfed/0211/02111nj1.htm

IMH 2.02 Activity You Tube videos on Airbus & Boeing http://www.youtube.com/watch?v=zIn0aF6eTRA http://www.youtube.com/watch?v=7QcUOPDTfTs http://www.youtube.com/watch?v=Wy_exNIEuM4 Research both companies and the subsidies issue &

provide their viewpoint on this type of indirect export subsidies. Utilize PPT format Brief History of Boeing and Airbus Description of product lines of both Locations of operations of both Summary of dispute over indirect export subsidies Student viewpoint on dispute including for or against

these subsidies – Argue your case

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

In Conclusion:

http://www.youtube.com/watch?v=RQjobBwvcUU

5 minute clip on Customs Border Protection trade overview