chapter 7 Flashcards
Tariff
a tax created to import goods. They are paid by Americans to us govt. Tariffs do not work
The purpose of tariffs is to reduce trade deficit and be a source of revenue however it is not
Quota
A direct restriction on the quantity of some good that may be imported into a country
Quota rent
the extra profit that domestic producers make when supply is artificially limited by an import quota
VER
– Voluntary export restraint
The importers pressure the exporting company to trade because Manufacturers want to be closer to the market
Subsidy
a direct payment plan from the government to small domestic companies/producers. They provide info, sponsor trade shows, promote sales. They help domestic producers compete against foreign imports and gain exports. They are better than tariffs because they provide protection without the expense of tariff
Tied aid
foreign money donated to a country that must be spent in the country providing the aid (donor country). This way the money always comes back. Big companies always win
Local content requirements
the requirement that a fraction of goods must be produced domestically. Can be physical or of value. Import domestically to avoid import duties
Buy American Act
items manufactured in the US must be manufactured from US manufactured materials
Administrative policies
bureaucratic rules that are designed to make it difficult for imports to enter a country. Giving a tough time to import hurts consumers by denying access to foreign products.
Dumping
selling goods in a foreign market below the average value/cost of production. Driving out competitors but then the price being raised
Anti-dumping policies are to protect domestic jobs
why do governments intervene
Unemployment Infant industry argument Cheap labor argument National defense Dealing with Enemy countries Protecting human rights Protecting consumers Strategic trade policy
Infant Industry argument
companies have small scale production and until they gain in size they want trade protection. The problem is that the govt keeps protecting the wrong companies. A country should let the market decide who to protect
GATT
general agreement on tariffs and trade. Established in 1947 where 23 countries came together to reduce restrictions and trade barriers. It was successful in making tariffs on goods but weak due to no enforcement power, the purpose was to promote free trade
Non-discrimination
members get the same rate as others meaning if the US is importing cars to japan for 10% then china should get the same
Uruguay round
new trade agreements which protected intellectual property, service and agricultural trade
