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Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
Trade insvestment polices
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Trade insvestment polices

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  • 1. Trade and Investment Policies GEETA SHIROMANI ASSOCIATE PROFESSOR
  • 2. Trade and Investment Policies. Trade Barriers  Tariffs  Quotas  Voluntary Export Restraint  Monetary Barriers  Standards  Local Content Requirements  Investment restrictions. (longer list on pg.82)  Bureaucratic Hurdles 3
  • 3. Trade Barriers. Tariffs – taxes based on the value of imported goods and services. Usually by product categories, sometimes countries. Revenue generating, discourage imports of undesirable products, ‘level the playing field’. Quotas – Restrictions on the number or monetary value of products that can be imported, (sometimes market share). Usually product and country specific. Voluntary Export Restraint – Country specific. Usually under pressure and severe threats. Designed to help domestic industries reorganize and restructure. Not subject to any previous trade accords. Monetary Barriers – exchange control, nonconvertible currency, differential exchange rates. Usually balance of payment problems (developing countries).
  • 4. Trade Barriers. Standards – Product specific. Health, Safety, Quality, Performance. Designed to protect consumers but are often disguised barriers. Local Content Requirements – Designed to aid domestic economy by either increasing sales of local manufacturers or encouraging foreign direct investment. Investment Restrictions – Restrictions on the percentage of ownership of local firms by foreign manufacturers. Designed to keep decision making and ownership in local hands. Bureaucratic Hurdles – Licenses, Testing, Certification, Buy domestic campaigns, Boycotts etc.
  • 5. Measures to facilitate trade. G.A.T.T. – General Agreement on Tariffs and Trade – Part of W.T.O. after 1994. Most Favored nation status – All members of WTO have to be given similar trading privileges. U.S. granted special status to China before it was part of W.T.O. W.T.O. I.M.F. – Facilitates trade by regulating exchange rates. Also gives loans and economic advise/direction.
  • 6. G.A.T.T.  General Agreement on Tariffs and Trade – established in 1947 to facilitate trade - nondiscrimination, transparent procedures, settlement of disputes and participation of developing countries. From 1962 to reduce tariffs. No enforcement powers and covered manufacturing and fuels.  Main issues in the last round of talks in 1986-1994 were agriculture, Textiles and apparel, services and intellectual property. Also power to enforce policies and decisions.  Developing countries concerned with opening developed country markets for agriculture (subsidies) and textiles (quotas).  Developed countries (mainly U.S.) concerned with services (Govt. restrictions) and intellectual property (piracy).  W.T.O. - This lead to the formation of the W.T.O. (World Trade Organization) in 1994. GATS and TRIPS agreements to deal with services and intellectual property.  Video – From GATT to WTO
  • 7. World Trade Organization  149 countries (as of December 2005)  Lower trade barriers, set rules governing trade between its members, settle trade disputes, and issue binding decisions. Video on WTO with examples of its work  WTO website  GATT became one of the agreements under WTO  General Agreement on Trade in Services. (GATS)  Trade related aspects of intellectual property rights (TRIPS)
  • 8. U.S position in world trade - History.  U.S. Multi-nationals the largest after WWII.  Exports as well as direct foreign investments  Controls imposed by Latin American, Asian, and European Governments.  70’s & 80’s competition from Japan and the N.I.C.  80’s U.S. Balance of trade problems.  90’s U.S. expansion of trade in technology, services, and intellectual property.
  • 9. Balance of trade/payments. Important because it effects currency values, domestic wages, employment, inflation and the general economy. Several measures to correct imbalance – e.g., Omnibus Trade and Competitiveness Act.; other export promotion efforts, and foreign investment promotion efforts.
  • 10. Omnibus Trade and Competitiveness Act.  Market Access - Non-Tariff barriers, Government Procurement, Telecommunications Market.  Export Expansion - relaxed F.C.P.A. (Foreign Corrupt Practices Act), easy export licenses, financial assistance, and information.  Import Relief - Anti-Dumping, Intellectual property protection, temporary relief.
  • 11. Export promotion efforts.  Export information and advise. (www.usatrade.gov)  Production support.  Marketing support.  Finance and Guarantees - Export-Import Bank, Agency for International Development, Overseas private Investment Corp.  Tax legislation.
  • 12. Foreign Investment promotion efforts.  Subsidies (e.g., Mississippi $295 million package to Nissan, Alabama 119 million to Mercedes, and 158 million to Honda, BMW in Spartanburg got $100,000 per job created). BMW Spartanburg Nissan Mississippi Honda Alabama
  • 13. Foreign Investment promotion efforts.  Financial – land or buildings, loans or loan guarantees, new infrastructure.  Tax Incentives – credits or rebates, depreciation allowance, special deductions, tax holidays.  Non-financial – Elimination of tariff and non-tariff barriers, protection from competition through barriers, Job training programs, protection from unions.  Foreign Trade Zones (customs privileged facilities).
  • 14. Foreign Trade Zones (Pg. 550-551) Areas where goods can be imported for storage and/or processing with tariffs and quota limits postponed until products leave the designated areas. If goods processed and exported than tariffs only on value added.
  • 15. Foreign Trade Zones (Pg. 550-551) If goods processed and sold in the country than tariffs only on parts imported. Located all over the world – more than 150 in the US. http://www.igeo.ufrj.br/gruporetis/sistfin/mapas/mapaglobal.jpg
  • 16. 1/30/2015 Advantages of Foreign Trade Zones Use of cheap labor or skilled workforce, and local content without paying duties. Lower tariffs for parts and lower transportation and insurance costs. Stockpile products while waiting for quotas or buyers. No duties on rejected or unsold products. Maquiladoras in Mexico

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