Chapter 6 - Instruments of trade and investment policies. The main goals of this chapter are to: Undertake an historical overview of main government policies that have influenced international trade, examine the major types of barriers that are currently affecting international trade and investment, examine the major types of export-enhancement measures and their impact on international business. | Chapter 6 Instruments of trade and investment policies Protectionism Free Trade the trade policy pendulum 6– Lecture plan Protectionist vs free trade policies prior to World War 2 Barriers to trade . tariff and non-tariff barriers, barriers to services Export enhancement measures subsidies financial assistance marketing assistance Arguments pro and against protection 6– The ‘pendulum’ of trade policy: between free trade and protectionism Mercantilism (16th century) Trade surplus; protectionism ‘Laissez-faire’ David Ricardo (early 19th century): free trade Great Depression: neo-Mercantilism Protectionism up in the US, UK, France Trade liberalisation after World War 2 GATT, IMF, World Bank, OECE (OECD) 6– Two groups of trade policy instruments Protection measures barriers to trade in goods and services Export enhancement measures 6– Barriers to trade and investment Tariff barriers Non-tariff barriers (. quotas, standards, procurement policies) Export restrictions Import restrictions Barriers to trade in services Financial limits (. exchange controls, profit remittance limits) Limits on FDI entry and operations 6– Trade and tariff barriers Tax imposed on imported physical goods effects of an indirect tax Tariffs – oldest form of trade policy specific, ad valorem and compound duties Good for government Good for producers but reduces efficiency Bad for consumers 6– Measuring tariff schedules —unweighted average A = 10% B = 5% C = 8% D = 7% 10+5+8+7 UWA = ------------- = 4 6– Measuring tariff schedules —weighted average ATR = (10 x ) + (5 x ) + (8 x ) + (7 x ) = 1 + 3 + + = Product Imp’s ID US$m. (%) A 100 10 B 600 5 C 150 8 D 150 7 Weights: A (); B (); C (): D (). 6– Price effects of an import duty A rise in domestic prices of less than amount of duty (. when a large trading country like the US can influence world prices. Supply schedules of foreign products are . | Chapter 6 Instruments of trade and investment policies Protectionism Free Trade the trade policy pendulum 6– Lecture plan Protectionist vs free trade policies prior to World War 2 Barriers to trade . tariff and non-tariff barriers, barriers to services Export enhancement measures subsidies financial assistance marketing assistance Arguments pro and against protection 6– The ‘pendulum’ of trade policy: between free trade and protectionism Mercantilism (16th century) Trade surplus; protectionism ‘Laissez-faire’ David Ricardo (early 19th century): free trade Great Depression: neo-Mercantilism Protectionism up in the US, UK, France Trade liberalisation after World War 2 GATT, IMF, World Bank, OECE (OECD) 6– Two groups of trade policy instruments Protection measures barriers to trade in goods and services Export enhancement measures 6– Barriers to trade and investment Tariff barriers Non-tariff barriers (. quotas, standards, procurement policies) Export restrictions
