Ch 06 Powerpoint Student

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Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 6 Business- Business- Government Government Trade Relations Trade Relations

description

lecture

Transcript of Ch 06 Powerpoint Student

Page 1: Ch 06 Powerpoint Student

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

6 Business-Business-GovernmentGovernment

Trade RelationsTrade Relations

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Political MotivesPolitical Motives

Protectjobs

Preservenationalsecurity

Respond to“unfair”

trade

Gaininfluence

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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

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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

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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

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Discussion QuestionDiscussion Question

What are some of the political, economic, and cultural reasons why countries intervene in trade?

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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

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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

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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

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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

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Discussion QuestionDiscussion Question

A geographic region within a nation and in which merchandise passes through with lower customs duties or fewer customs procedures is called a __________.

a. No subsidy zone

b. Special quota zone

c. Foreign trade zone

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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

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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

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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

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Local Content Requirements

Laws that domestic market must supply a specific amount of a product

Forces international companies toemploy local resources in production process

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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

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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

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Discussion QuestionDiscussion Question

What are some of the methods that governments use to restrict international trade?

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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

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Uruguay NegotiationsUruguay Negotiations

Improved intellectual property rules

Extended coverage to services

Created World Trade Organization

Reduced agriculture barriers

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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

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Discussion QuestionDiscussion Question

The World Trade Organization principle that calls for nondiscrimination among trading partners is called __________.

a. Least favored status

b. Normal trade relations

c. Countervailing relations