3.4: Host Country and Home Government Incentives for International Trade Flashcards
Covers content from: Chapter 2 - Home Grown Business
What are the two host country and home government incentives for international trade?
- Grants
- Taxation
Describe grants as an Incentive for International Trade
Grants are financial awards/payments utilised by The Australian Government as well as overseas Governments to eligible businesses as an incentive for international trade and export development.
What is an example of a Host Country/Home Government Grant?
AusTrade administers Export Market Development Grants (EMDG) to encourage Australian SMEs to develop export markets. These grants focus on loss minimisation for small and medium businesses that are developing export markets. It reimburses up to 50% of eligible export promotion expenses above $5,000 provided that the total expenses are at least $15,000.
Describe taxation as an Incentive for International Trade
It isn’t taxation itself that is a benefit to international business, but rather the reduction of certain taxes for businesses that conduct Research and Development (R&D) in Australia or broadly contribute to international trade and expand the Australian economy. It encourages industry to conduct R&D that may not otherwise been conducted, and an incentive for smaller firms to undertake R&D in less complex support system.
What is an example of Taxation as a Host Country/Home Government Incentive?
The Duty Drawback Scheme enables exporters to obtain a refund of customs duty paid on imported goods where those goods will be treated, processed, or incorporated in other goods for export. (bike tyres)
What are the three Benefits of Home Grown/Developed Products?
- creation of jobs and income locally
- improvement of Australia’s manufacturing capabilities
- improved financial growth/position for businesses
Explain the creation of jobs and income locally as a benefit of home grown/developed products.
( how ) - New products produced in Australia undergo research and development locally. This promotes job growth as complicated research and utilisation of technology to create the goods and services require labour.
( why ) - With more expertise orientated employees being hired, higher income is offered as well and the local labour market becomes more skilled/experienced.
Explain the improvement of Australia’s manufacturing capabilities as a benefit of home grown/developed products
( how ) - As businesses develop their goods and services in Australia they are refining processes of manufacturing, research and development involved in creating their goods and services. ( why ) - These processes become more efficient over time with repetition and refinement and can be used to create new goods and services that are cheaper to produce, able to be made in larger quantities with less initial investment required for the business.
Explain improved financial growth/position for businesses as a benefit of home grown/developed products
( how ) - Australian businesses benefit from an established presence and familiarity with the Australian market that allows them to position their goods and services. Foreign firms lack this knowledge and as such are at a disadvantage.
( why ) - New revenue streams are made possible by this with the ability to expand further into new local markets with less uncertainty than foreign rivals; leading to financial growth and increased market share.
