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Instrument of trade policy
- 1. INSTRUMENTS OF TRADE POLICY
- 2. Collection of rules and regulations which pertain to trade. Help a nation's international trade run more smoothly, by setting clear standards Goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually beneficial trade policies.
- 3. Commercial Policy Instruments Trade Contraction Trade Expansion Tariff Export tax Import quota Voluntary Export Restraint (VER) Import subsidy Export subsidy Voluntary Import Expansion (VIE) Price Quantity Price Quantity
- 4. Tariffs or customs duties Transit duties Import duties Export duties Bounties on exports Direct restriction on imports
- 6. Tax placed on a good exported from a country. Create economic barriers to trade. Raise prices of goods. increases the cost to sell domestic goods overseas.
- 7. Trade restriction on the quantity of a good that an exporting country is allowed to export to another country. Fall under the broad category of non-tariff barriers. Effects of Voluntary Export Restraints
- 8. IMPORT SUBSIDY EXPORT SUBSIDY Subsidies on goods and services that becomes payable to resident producer When goods cross the frontier of the economic territory or when the service are delivered to institutional unit Government policy to encourage export of goods. Reduces the price paid by foreign importers. Generated when internal price supports, as in a guaranteed minimum price for a commodity.
- 9. an agreement to increase the quantity of imports of a product over a specified period of time. A change in a country's policies to allow more imports.
- 10. Instruments Of Trade Policy Trade policy uses seven main instruments: Tariffs Subsidies Import quotas Voluntary export restraints local content requirements administrative policies, and antidumping law. TRIM-V,IM-M-3/By- Ms. Gazal Sharma
- 12. 1. SPECIFIC TARIFFS 2. AD VALOREM TARIFFS
- 13. An amount of money per unit of good sold. Governments may impose tariffs To raise revenue or to protect domestic industries from foreign competition, since consumers will generally purchase cheaper foreign produced goods. Tariffs can lead to trade wars as exporting countries reciprocate with their own tariffs on imported goods. (Under WTO)
- 14. Ad valorem, means "according to value." levied based on the determined value of the item being taxed. Value of a transaction real estate or personal property. The most common ad valorem taxes are property taxes levied on real estate.
- 15. Gainers The government gains, Tariff increases govt. revenues. Domestic producers gain because The tariff affords them some protection. Sufferers Consumers suffer, because they must pay more for certain imports.
- 16. A payment to a domestic producer as individual, business or institution Form of a cash payment or a tax reduction. Many forms including cash grants low-interest, tax breaks and government equity participation in domestic and government producers. To encourage export of goods and discourage sale of goods On the domestic market through direct payments, low- cost loans, tax relief for exporters, or government- financed international advertising.
- 17. Government-imposed trade Direct restriction on the quantity Help in regulate the volume Imposed on specific goods boost domestic production by restricting foreign competition.
- 18. ADVANTAGE DISADVANTAGE Foreign Exchange Implication. Flexibility Corruption Monopoly Profit Monopoly Growth Distortion in Trade
- 19. Government actions and policies that restrict or restrain international trade, often with the intent of protecting local businesses and jobs from foreign competition. Type of policy that limits unfair competition from foreign industries. Politically motivated defensive measure. Destructive in the long term. It makes the country and its industries less competitive in international commerce.
- 20. ADVANTAGE DISADVANTAGE If a company is trying to grow strong in a new industry, tariffs will protect it from foreign competitors. Time to develop their own competitive advantages. Temporarily creates jobs for domestic workers. Trade protectionism weakens the industry. The domestic product will decline in quality
- 21. Way to restrict trade. Include Quotas, embargoes, sanctions and other restrictions. Used by large and developed countries. Economy to control the amount of trade.
- 22. 1. Quantity Restrictions, Quotas and Licensing Procedures. 2. Foreign Exchange Restrictions. 3. Technical and Administrative Regulations. 4. Consular Formalities(certificates). 5. State Trading. 6. Preferential Arrangement.
- 23. Trade restriction Quantity of goods that can be exported out of a country during a specified period of time. limitation on the amount of a product, Protection for its domestic businesses against such foreign competition. Fall under the broad category of non-tariff barriers. Quotas, Embargoes, Sanctions levies and other restrictions.
- 24. Benefits Both imports and quotas and VERs benefit domestic producers by limiting competition. Sufferers VER always raises the domestic price of an imported goods, so VER do not benefit consumers.
- 25. When a foreign company makes products in a country, the materials, parts etc that have been made in that country rather than imported. A minimum level of local content is sometimes a requirement under trade laws when giving foreign companies the right to manufacture in a particular place. Rules that a company must derive a certain amount of the final value of a good or service from domestic firms, either by purchasing from local companies or by manufacturing or developing the good or service locally
- 26. Bureaucratic rules designed to make it difficulty for import to enter a country. Hurt consumers by denying access Possibly superior foreign products. Government of all types uses informal or administrative policies to restrict imports & boost exports.
- 27. Protectionist tariff imposes on foreign imports that it believes are priced below fair market value. Penalty imposed on suspiciously low-priced imports. Assessed generally in an amount equal to the difference between the importing country's FOB (Free On Board) price of the goods.
Notes de l'éditeur
- Import subsidy Export subsidies are also generated when internal price supports, as in a guaranteed minimum price for a commodity, create more production than can be consumed internally in the country. Export subsidy is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising. An export subsidy reduces the price paid by foreign importers, which means domestic consumers pay more than foreign consumers. The World Trade Organization (WTO) prohibits most subsidies directly linked to the volume of exports, Incentives are given by the government of a country to exporters to encourage export of goods. Export subsidies are also generated when internal price supports, as in a guaranteed minimum price for a commodity, create more production than can be consumed internally in the country.
- A tariff is any tax or fee collected by a government. Tax imposed on imported goods and services by a government. Used to restrict imports by increasing the price of goods and services purchased from overseas and making them less attractive to consumers.
- A tariff specified as an amount of money per unit of good sold. Governments may impose tariffs to raise revenue or to protect domestic industries from foreign competition, since consumers will generally purchase cheaper foreign produced goods. Tariffs can lead to trade wars as exporting countries reciprocate with their own tariffs on imported goods. Organizations such as the World Trade Organization (WTO) exist to combat the use of egregious tariffs.
- against foreign-competitors by increasing the cost of imported foreign goods.
- A subsidy by a government, payment to a domestic producer as individual, business or institution Form of a cash payment or a tax reduction. Many forms including cash grants low-interest, tax breaks and government equity participation in domestic and government producers. To encourage export of goods and discourage sale of goods On the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising.
- Government-imposed trade restriction that limits the number, or monetary value, of goods that can be imported or exported during a particular period. An import is a direct restriction on the quantity of some good that may be imported into a country Quota is a limit to the quantity coming into a country. Quotas are used in international trade to help regulate the volume of trade between countries. They are sometimes imposed on specific goods to reduce imports and increase domestic production. In theory, quotas boost domestic production by restricting foreign competition.
- ADVANTAGE Foreign Exchange Implication: The main advantage of a quota is that it keeps the volume of imports unchanged even when demand for imported articles increases. It is because a quota makes the completely elastic (horizontal) import supply curve completely inelastic (vertical). But a tariff permits imports to rise when demand increases, particularly if the demand for imports becomes inelastic. Thus, a quota leads to greater foreign exchange savings compared to tariff (which may even lead to an increase in foreign exchange spending because imports may rise even after tariff). ii. Precise Outcome: Another advantage of a quota is that its outcome is more certain and precise, while the outcome of a tariff is uncertain and unclear. This is so because the volume of imports remains unchanged if a quota is imposed. But this is not so in the case of a tariff. iii. Flexibility: Finally, Ingo Walter argues that “quotas tend to be more flexible more easily imposed, and more easily removed instruments of commercial policy than tariffs. Tariffs are often regarded as relatively permanent measures and rapidly built powerful vested interests which make them all the more difficult to remove.” DISADVANTAGE i. Corruption: ADVERTISEMENTS: A quota generates no revenue for the government. However, if the government auctions the right to import under a quota to the highest bidder then quotas are similar to a tariff. But a quota leads to corruption. Usually officials charged with the allocation of import licenses are likely to be exposed to bribery. Under this situation the tariff is preferable to the quota. ii. Monopoly Profit: Secondly, a quota creates a monopoly profit for those with import licenses. This means that consumer surplus is converted into monopoly profits. Thus, a quota is likely to lead to a greater loss of consumer welfare. If a tariff is imposed, domestic price will be equal to import price plus tariff’. iii. Monopoly Growth: Thirdly, allied to this disadvantage of a quota is that a quota is much more restrictive in effect as it restricts competition. Thus, a quota may ultimately lead to concentration of monopoly power among importers and exporters. iv. Distortion in Trade: Finally, a quota has the tendency to distort international trade much more than tariffs since its effects are more vigorous and arbitrary. Thus, we will have to make a choice between a tariff and a quota. A tariff is usually considered a less objectionable method of trade restriction than an equivalent quota. A tariff permits imports to increase when demand increases and, consequently, the government is able to raise more revenue.
- A non-tariff barrier is a way to restrict trade using trade barriers in a form other than a tariff. Nontariff barriers include quotas, embargoes, sanctions, levies and other restrictions and are frequently used by large and developed countries. Nontariff barriers are another way for an economy to control the amount of trade that it conducts with another economy either for selfish or altruistic purposes.
- 1. Quantity Restrictions, Quotas and Licensing Procedures: Under this system, the maximum quantity of different commodities which would be allowed to be imported over a period of time from various countries is fixed in advance. The quantity allowed to be imported or quota fixed normally depends upon the relations of the two countries and the need of the importing country. 2. Foreign Exchange Restrictions: Under this system the importer must be sure that adequate foreign exchange would be made available for the imports of goods by obtaining a clearance from the exchange control authorities of the country before concluding the contract with the supplier. 3. Technical and Administrative Regulations: The imposition of technical production, technical specifications etc. to which an importing commodity must conform. Such type of technical restrictions is imposed in case of pharmaceutical products etc. Besides technical restrictions, administrative restrictions such as adherence to certain documentary procedure are adopted to regulate imports. These measures impede the free flow of trade to a large extent. 4. Consular Formalities: Large number of countries demands that shipping documents must accompany the consular documents such as: (a) Certificate of origin, (b) Certified invoices, (c) Import certificates etc. Sometimes, it is also insisted that such documents should be drawn in the language of importing countries. In case the documentation is faculty and is not drawn in the language of the importing country heavy penalties are imposed. Fees charged for such documentation are quite heavy.
- VOLUNTARY EXPORT RESTRAINTS fall under the broad category of non-tariff barriers, which are restrictive trade barriers like quotas, embargoes, sanctions levies, and other restrictions. Typically, VERs are a result of requests made by the importing country to provide a measure of protection for its domestic businesses that produce competing goods, though these agreements can be reached at the industry level, as well. VERs are often created because the exporting countries would prefer to impose their own restrictions than risk sustaining worse terms from tariffs and/or quotas. They have been used by large, developed economies. They've been in use since the 1930s, and have been applied to a wide range of products, from textiles to footwear, steel and automobiles. They became a popular form of protectionism in the 1980s. A self imposed limitation on the amount of a product that one country is permitted to export to another. It will often be a nation's official response to a request made by the country being exported to for protection for its domestic businesses against such foreign competition.
- When a foreign company makes products in a country, the materials, parts etc that have been made in that country rather than imported. A minimum level of local content is sometimes a requirement under trade laws when giving foreign companies the right to manufacture in a particular place. Rules that a company must derive a certain amount of the final value of a good or service from domestic firms, either by purchasing from local companies or by manufacturing or developing the good or service locally.
- An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. A penalty imposed on suspiciously low-priced imports, to increase their price in the importing country and so protect local industry from unfair competition. Anti-dumping duties are assessed generally in an amount equal to the difference between the importing country's FOB price of the goods and (at the time of their importation) the market value of similar goods in the exporting country or other countries. Stands for "Free On Board" or "Freight On Board" is a shipping term used in retail to indicate who is responsible for paying transportation charges. It is the location where ownership of the merchandise transfers from seller to buyer.