Final Flashcards
Impact of the oil crisis of the 1970s
- Industrialized economies relied on crude oil and OPEC was their supplier
- Dramatic inflation due to increase oil prices -> suppressed economic activities
Protectionism
The use by nations of legal barriers, exchange barriers, and psychological barriers to restrain entry of goods from other countries
Protectionism around the world
Protects a country’s markets from intrusion by foreign companies
Reasons for protectionism
- No imports = more job opportunities for citizens
- Increase national security
- Infant Industry Argument
- Power of special interest groups
- Tax revenue
- Trade Deficits
Infant Industry Argument
New industry won’t survive with competition
Trade deficits
The amount by which the cost of a country’s imports exceeds the value of its exports
3 Types of Trade Barriers
- Tariffs
- Dumping
- Nontariff Barriers
Tariffs
- Taxes imposed by a government on goods entering at its borders
- Imported goods become so expensive that people switch to buying domestic
- Impacts lower class more than upper class
Specific tariff
Everyone pays a specific tax amount, regardless of status
Ad Valorem tariff
- A tariff assessed as a percentage of the value of an import
- Protects cheap products from being unreasonably expensive
Dumping
Occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production and is illegal.
Nontariff Barriers
a form of restrictive trade where barriers to trade are set up and take a form other than a tariff
Nontariff Barriers specific limitations on trade
- Quotas
- Import Licenses
- Proportion Restrictions of foreign to domestic goods
- Minimum import price limits
- Embargo
Quotas
- Specific units or dollar limits applied to a particular type of good
- Most effective limitation on trade
Import Licenses
Limits quantities on a case-by-case basis
Embargo
An official ban of trade or other commercial activity with a particular country
Customs and Administrative Entry Procedures
- Valuation
- Antidumping Practices
- Tariff Classifications
- Documentation Requirements
- Fees
- Unfinished products always run cheaper to import
Valuation
An estimation of something’s worth
Antidumping Practices
Designed to prevent foreign producers from “predatory pricing”, a practice whereby a foreign producer intentionally sells its products in the US for less than the cost of production to undermine the competition and take control of the market
Types of Standards
- Health/Safety Regulations
- Intergovernmental acceptances of testing methods and standards
- Packaging/ Labeling/ Marketing
Standards
Countries usually impose standards on classification, labeling and testing of products in order to be able to sell domestic products, but also block sales of products of foreign manufacture
Types of Nontariff Barriers
- Specific Limitations on Trade
- Customs and Administrative Entry Procedures
- Standards
- Government Participation in Trade
- Charging on imports
- Others
Government Participation in Trade
- Government procurement procedure/policies
- Export subsidiaries
- Countervailing duties
Charging on Imports
- Prior import deposit subsidies
- Administrative fees
- Special supplementary duties
- Variable levies
- Border taxes