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    IB Note Chapter 3

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    IB Note Chapter 3

    Uploaded by

    danielsolomonabraha
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    Short Note

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    © © All Rights Reserved

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    Short Note

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    3 views3 pages

    IB Note Chapter 3

    Uploaded by

    danielsolomonabraha
    Short Note

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    INTERNATIONAL

    BUSINESS
    NOTE
    CHAPTER THREE
    INTERNATIONAL TRADE POLICIES AND
    INSTITUTIONS
    Instruments of Trade Policy
     Free trade is a trade without government intervention or interference.
     The government does not attempt to restrict what its citizens can buy from
    another country or what they can sell to another country.
     There are several trade policy:
    1. Tariffs
     Tariff is a tax levied on imports.
    A. Specific Tariffs
     Levied a fixed charge for each unit of imported product.
     Based on physical unit of the product like weight and volume.
    B. Ad Valorem Tariffs
     Levied a charge in proportion of the value of imported product.
     Based on the value of the product.
     The charge fluctuate based on the value of imported product.

    Why does government impose tariffs?


     To increase government revenue
     To protect domestic producers

    2. Subsidies
     Subsidy is a government to domestic producers.
     Subsidies help domestic producers:
     To gain export market
     To compete with low cost imported products
    3. Import Quota
     Import quota is restriction of the quantity of imported product.

    The Cases for Government Intervention


    1. Political Arguments
     The government intervene to protect the interest of certain groups (normally producers) at
    the expense of other groups (normally consumers).
    2. Economic Arguments
     The government intervene to boost the overall economic (wealth) of the nation.
     To the benefit of all (both the producer and the consumer).

    The Development of World Trade Organization


     After the WWII U.S. and other nations understand the value of free trade and established
    General Agreement on Tariffs and Trade (GATT) in 1947 to govern the world trade.
     After fifty years, in 1995, the General Agreement on Tariffs and Trade (GATT) changed
    its name to the World Trade Organization (WTO).
     World Trade Organization is currently focusing on:
    1. Anti-dumping policies
    2. Protectionism in agriculture
    3. Protecting intellectual property
    4. Market access for non agricultural products

    What is dumping?
     Dumping is selling goods in a foreign market below their cost of production.
     Dumping is selling goods in a foreign market below their fair market value.

    Why companies use dumping method?


     To unload excess production in foreign markets.
     Drive indigenous competitors out of that market, and later raising prices and earning high
    profits.
     Anti-dumping policy is important to protect indigenous or domestic companies from
    unfair competition.

    Trade Barriers
     Trade barriers are any government policy or regulation that restricts or limits international
    trade.
     The purpose of trade barriers can vary, from protecting domestic industries to addressing
    national security concerns.
     Trade barriers include:
     Tariffs
     Quotas
     Subsidies

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