Upload
jatin-vaid
View
312
Download
1
Embed Size (px)
Citation preview
Trade Barriers: Governmental Influence on Trade
Presented By:
Jatin Vaid
1International Business - Jatin Vaid
Protectionism
• Company’s performance, ability to compete and survival depends on government’s trade policies.
• Policies may limit or enhance the ability to sell abroad.
• Restrictions (Tariffs, etc.) or Competitive support (subsidies, etc.)
2International Business - Jatin Vaid
Reasons for governmental intervention
• Preventing Unemployment
• Protecting Infant Industries
• Promoting Industrialization
• Improving Comparative Position
Economic Reasons
• Maintaining Essential industries
• Dealing with unfriendly countries
• Maintaining Control
• Preserving National Identity
Non – Economic Reasons
3International Business - Jatin Vaid
1.1 Preventing Unemployment
• Economic employment of full employment
• Gaining jobs by limiting imports
• Other countries may retaliate
• Impact on other industries
International Business - Jatin Vaid 5
1.2 Protecting Infant Industries
• Government should shield an emerging industry from foreign competition by guaranteeing it a large share of domestic market until it is ready to compete.
• Efficiency gains take time • Economies of scale & experience curve translate
into higher productivity• Benefits include higher employment, lower social
costs and higher tax revenues
6International Business - Jatin Vaid
1.3 Promoting Industrialization
• Higher manufacturing base leads to higher per capita income
• Restricting imports leads to developing an industrial base
• Increase FDI
• Export – led development for local consumption
• Nation building: Build infrastructure, rural development, skill building
7International Business - Jatin Vaid
1.4 Improving Comparative Position
• Nation’s absolute economic welfare compared with other nations
• Balance of trade adjustments
• Gaining access to foreign markets
• Restrictions as bargaining tool
• Controlling prices
8International Business - Jatin Vaid
2. NON – ECONOMIC REASONS
Reasons for Government’s Intervention
International Business - Jatin Vaid 9
2. Non – Economic Reasons
2.1 Maintaining essential industries:
• Protect essential domestic industries
• Financial inclusion of necessities
• Rural penetration at affordable prices
• Maintaining competitive advantages in essential industries.
• Water, electricity, banking, railways, etc.
10International Business - Jatin Vaid
2.2 Dealing with unfriendly countries
• National defense
• Trade of strategic goods – data encryption technology, arms & ammunitions, banking, etc.
• Used as a method to achieve political objectives
11International Business - Jatin Vaid
2.3 Maintaining Control
• Governments give aid to and encourage imports from countries that join a political alliance or vote in a preferred way within international bodies.
• Political motives
12International Business - Jatin Vaid
2.4 Preserving national identity
• Unifying sense of identity to be sustained
• National culture to be protected
• Defining boundaries for trade
13International Business - Jatin Vaid
Instruments of Trade Control
• Import tariffs
• Export Tariffs
• Transit Tariffs
Tariff Barriers
• Subsidies
• Tied Aids
• Minimum Sale Price
• Quotas
• Embargoes
• Buy – Local Legislation
• Specific Permissions Required
Non – Tariff Barriers
14International Business - Jatin Vaid
Tariff Barriers
• Directly affect the prices of goods traded
• Also called Duty or tax levied on goods traded internationally.
• Most common type of trade control
• Specific duty; Ad – Valorem duty; Compound duty.
15International Business - Jatin Vaid
Types of tariffs
i. Import tariffs: Collected by importing country
ii. Export tariffs: Collected by exporting country
iii. Transit tariffs: Collected by the country through which the goods have passed.
16International Business - Jatin Vaid
Non Tariff Barriers
• May directly affect either price or quantity of goods traded internationally.
17International Business - Jatin Vaid
Types of Non – Tariff Barriers
i. Subsidies: Direct assistance to companies, making them more competitive.
ii. Tied Aids: Loans to other countries, a part of which is spend in donor country. E.g. Infrastructure, telecommunication.
iii. Minimum sale price: Goods sold at a price set by authorities after clearances.
18International Business - Jatin Vaid
.
iv. Quotas: Limiting the quantity of goods imported or exported at a given time frame.
v. Embargoes: Prohibits all forms of trade from a country or a category of goods.
vi. Buy – Local: Favoring domestic producers or goods of local origin.
vii. Specific Permissions: import or export license.
19International Business - Jatin Vaid