copyright © 2012 pearson education, inc. publishing as prentice hall 6 business- government trade...
TRANSCRIPT
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
6 Business-Business-GovernmentGovernment
Trade RelationsTrade Relations
6 - 2Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Political MotivesPolitical Motives
Protectjobs
Preservenationalsecurity
Respond to“unfair”
trade
Gaininfluence
6 - 3Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Economic Motives IEconomic Motives I
Potential results
+ National income increases
– Wrong industries protected
– Firms grow complacent
– Consumer prices rise
– Public funds poorly spent
Protect infant industries
Protect emerging industries during development from global competition
6 - 4Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Economic Motives IIEconomic Motives II
Potential results
+ Global industry created
– Firms’ efficiency reduced
– Domestic costs increase
– Special interests benefit
Pursue strategic trade
policyHelp companies to achieve economies of scale and gain a first-mover advantage
6 - 5Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Cultural MotivesCultural Motives
Result of increasedResult of increasedglobalizationglobalization
Nations block importsNations block importsdeemed harmfuldeemed harmful
Usual suspectsUsual suspectsare U.S. media andare U.S. media and
consumer goodsconsumer goods
Protect national identity
6 - 6Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Trade Promotion and Trade Promotion and RestrictionRestriction
Trade promotionmethods
Trade restrictionmethods
Subsidies
Export financing
Foreign trade zones
Special government agencies
Tariffs
Quotas
Embargoes
Local content requirements
Administrative delays
Currency controls
6 - 7Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Financial assistance in the form of cash, tax breaks, price supports, etc.
SubsidiesSubsidies
Potential results
+ Increased competitiveness
– Encourage inefficient firms
– Increased consumer prices
– Overuse of resources
6 - 8Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Export FinancingExport Financing
Export-Import Bank of the United States Working capital loan guarantees Credit information on nation or firm abroad Export credit insurance against loss Loan guarantees to buyers of U.S. goods and much more…
Export-Import Bank of the United States Working capital loan guarantees Credit information on nation or firm abroad Export credit insurance against loss Loan guarantees to buyers of U.S. goods and much more…
Financing such as low-interest loans and loan guaranteesFinancing such as low-interest loans and loan guarantees
6 - 9Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Designated region in which merchandise is allowed to pass through with lower customs duties (taxes) and/or fewer customs procedures
Purpose is to increase employment and trade within the nation
Foreign Trade ZonesForeign Trade Zones
6 - 10Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Special Government Agencies
Organize trade missions for officials and businesses
Operate export-promotion offices at locations abroad
Help import products the home nation does not produce
6 - 11Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Tariffs
Potential results
+ Protect domestic firms from competitors+ Generate income for the government
– Reduce competitiveness of home-based firms– Raise consumer prices
Export tariff
Transit tariff
Import tariff
Government tax levied on a product as it enters or leaves a nation
6 - 12Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Import and Export QuotasImport 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
1. Protect domestic producers of a good
2. Force outside firms to compete for market access
Export Quotas
1. Retain adequate domestic supply of a product
2. Restrict world supply of a product to raise its price
6 - 13Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
EmbargoesEmbargoes
Complete ban on trade (imports and exports)in one or more products with a particular country
Can be difficult for a nation to
enforce
Often used to achieve political
goals
Most restrictive nontariff trade
barrier
6 - 14Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Local Content Requirements
Laws that domestic market must supply a specific amount of a product
Forces international companies toemploy local resources in production process
6 - 15Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Administrative Delays
Regulatory controls or bureaucratic rules to slow imports into a country
Inconvenient ports for imports
Product-damaging inspections
Understaffed customs offices
Lengthy licensing procedures
6 - 16Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Currency Controls
Restrictions on theconvertibility of a currency Limit the amount of
globally accepted currency available to pay for imports
Set an unfavorable exchange rate when paying for imports
6 - 17Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
General Agreement onGeneral Agreement onTariffs and Trade (GATT)Tariffs and Trade (GATT)
Early Success:• Tariffs down 35%• Trade up 2,000%
Then Problems:• Nontariff barriers• Services left out
6 - 18Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Uruguay NegotiationsUruguay Negotiations
Improved intellectual property rules
Extended coverage to services
Created World Trade Organization
Reduced agriculture barriers
6 - 19Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
World Trade Organization World Trade Organization (WTO)(WTO)
Dispute settlement bodyDispute settlement body
Doha trade talks Doha trade talks
Normal trade relations status Normal trade relations status
Dumping and antidumpingDumping and antidumping