Chap 9 - Instruments of trade policy

Question 1

Instrument of trade policy

Answer 1

1. Tariffs
2. Export Subsidies
3. Voluntary Export Restraint (VER)
   - Others :
4. Export credit subsidies
5. Government procurement
6. Bureaucratic Regulations

Question 2

Export Credit Subsidies:

Answer 2

• Exporters are provided low interest loans

Question 3

Government Procurement:

Answer 3

all government agencies are required to purchase from domestic producers, regardless of their higher process and inferior quality as compare to the import

Question 4

Bureaucratic Regulation:

Answer 4

Regulations such as safety, health, quality and customs regulations (intended to discourage foreign competition

Question 5

Voluntary Export Restraint (VER):

Answer 5

A quota in which the exporting country impose itself a quota.

• The VER is requested by importing government (not really voluntary), arm twisting measure

Question 6

Export Subsidies:

Answer 6

government try to encourage export through some form of subsidy.

Subsidies :

• cash repayment
• rebates in imports raw material (machenery too)
• “guarantee” loans

Worse than tariff, they distort the free market mechanism(international terms) (los for government and consumers)

Question 7

meaning of tariffs:

Answer 7

• A government imposed increase in the price of an import (like added cost of transportation)

Question 8

cost and benefits of tariffs:

Answer 8

cost:

• consumers pay higher prices
• reduction of choices

benefits:
- domestic producers expand production
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