The document discusses various topics related to government intervention in trade and investment. It begins with learning objectives and then covers benefits of free trade, rationales for government intervention, types of intervention instruments like tariffs and quotas, consequences of protectionism, evolution of trade policies from GATT to WTO, examples of market liberalization in countries like China and India, and how firms can respond to intervention through strategies like lobbying, customs classification, and investment incentives.
International trade is distorted by countries applying tariff and non tariff trade barriers.
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Econ01. Economic of Trade and Economic of Integrationaeronchua
This Powerpoint was our report for Principles of Economics covering the topics Economic of Trade and Economic of Integration with the ASEAN Economic Integration 2015.
This is taken from various books and internet articles.
Not for commercial use and for personal reference only.
Thank you!
"That in all things, God may be Glorified"
Non-Tariff barriers are trade barriers that restrict imports but are not in the usual form of a tariff.
Some common examples are anti-dumping measures and countervailing duties also called non-tariff barriers.
Non-Tariff barriers include macro-economic measures affecting trade.
Non-Tariff barriers comes under Trade Policy.
About the establishment, ASEAN Economic Community (AEC), free trade agreement and positive as well as negative impact of ASEAN in International Business viewpoints.
By Swikar Dahal
Trade policies in developing countries have been central to the analysis of international development economists over the past decades. The desire for rapid economic growth in developing countries has raised many questions about the relationship between trade and growth. This PPT examines the fact that the policies adopted in many developing countries have often been very different from those emanating from rational allocation models and have provided researchers/ students with a wide scope for analyzing their effects.
IMPACT OF GOVERNMENT POLICIES ON TRADE IN INDIA
Trade policies determine the size
of markets for the output
of firms and hence strongly influence
both foreign and domestic investment.
International trade is distorted by countries applying tariff and non tariff trade barriers.
Want more FREE resources? Checkout the B2B Whiteboard youtube channel:
www.youtube.com/b2bwhiteboard
Or join us on Facebook today: www.facebook.com/b2bwhiteboard
Econ01. Economic of Trade and Economic of Integrationaeronchua
This Powerpoint was our report for Principles of Economics covering the topics Economic of Trade and Economic of Integration with the ASEAN Economic Integration 2015.
This is taken from various books and internet articles.
Not for commercial use and for personal reference only.
Thank you!
"That in all things, God may be Glorified"
Non-Tariff barriers are trade barriers that restrict imports but are not in the usual form of a tariff.
Some common examples are anti-dumping measures and countervailing duties also called non-tariff barriers.
Non-Tariff barriers include macro-economic measures affecting trade.
Non-Tariff barriers comes under Trade Policy.
About the establishment, ASEAN Economic Community (AEC), free trade agreement and positive as well as negative impact of ASEAN in International Business viewpoints.
By Swikar Dahal
Trade policies in developing countries have been central to the analysis of international development economists over the past decades. The desire for rapid economic growth in developing countries has raised many questions about the relationship between trade and growth. This PPT examines the fact that the policies adopted in many developing countries have often been very different from those emanating from rational allocation models and have provided researchers/ students with a wide scope for analyzing their effects.
IMPACT OF GOVERNMENT POLICIES ON TRADE IN INDIA
Trade policies determine the size
of markets for the output
of firms and hence strongly influence
both foreign and domestic investment.
A good slide on export vs import it will help you more to understand about export vs import. just look at this slide and you automatically see how worthy this slides are . Thank you
RequireCompare the policies in other countries (posted by other .docxWilheminaRossi174
Require
Compare the policies in other countries (posted by other students) and comment on it. (at least 2 posts should be commented)
Post 1
Tools of the trade policy Myanmar are applying towards the trading partners
Despite being a founding member of the World Trade Organization (WTO), Myanmar was cut off from the rest of the world for decades due to political unrest. Not until 2011, under a new administration run by civilians, did the nation begin to seek fundamental changes to drive structural transformations, boost national productivity, and encourage economic growth. In accordance with the guidelines of the WTO, the current regime worked closely with the various ministries to promote trade (Doan, 2019). To do this, the government first issued, amended, or revised several laws that were connected to trade in order to bring them into line with global commitments. Myanmar has a long history of protecting its local producers through the use of tariffs, quotas, and subsidies. These measures have been used to protect a variety of industries, including agriculture, manufacturing, and services. Tariffs are taxes on imported goods that make them more expensive than similar domestic products. Quotas limit the amount of a particular good that can be imported into a country. Subsidies are payments from the government to domestic producers to help them compete with imported goods.
In 2000, Myanmar's government enacted a series of tariffs designed to promote the growth of the nation's industries and protect specific businesses. By making imported goods more expensive, tariffs make it more difficult for foreign companies to sell their products in Myanmar (Doan, 2019). This gives local producers a better chance to succeed. Tariffs are a tool that the government can use to promote local industry and protect jobs. When foreign companies are unable to sell their goods as easily in Myanmar, it reduces the amount of competition for local producers. This gives them a better chance to sell their products and thrive. Myanmar's tariffs are typically quite high, often ranging from 20 to 30 percent. They cover a wide range of products, including agricultural goods, manufactured products, and raw materials. Tariffs are often applied when Myanmar's government is trying to encourage the growth of certain industries or protect specific businesses. Myanmar has linked 18.4percent of its tariff lines using the 10-digit HS code. Every fixed rate is ad valorem. The typical bound rate is 87.5%. The average limit tariff on agricultural items is 110.7%, whereas the average bound tariff on non-agricultural commodities is 22.5percent. Final bound tariffs vary from 0% for industrial machinery and transportation equipment to 550percent for chemicals, drinks, tobacco, grains, and foodstuffs.
Myanmar's administration uses a system of production quotas to protect local producers and encourage economic growth. The size and scope of the quotas.
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Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
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Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
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2. Learning Objectives
1. The nature of government intervention
2. Rationale for government intervention
3. Instruments of government intervention
4. Consequences of government intervention
5. Evolution of government intervention
6. Intervention and the global financial crisis
7. How firms can respond to government intervention
Sunday, 05
February 2023
3. Benefits of Free Trade
Free trade increases prosperity of a nation as it brings:
access to consumers to buy more, better-quality products at lower costs.
economic growth
enhanced efficiency
increased innovation
greater efficiency
drives competitiveness and fuels long term growth
promotes fairness
Sunday, 05
February 2023
4. Government Intervention in Trade and
Investment
Governments intervene in trade and investment to
following objectives:
Political objectives
Social objectives
Economic objectives
Technological objectives
Sunday, 05
February 2023
5. Contd…
Governments impose trade and investment
barriers that benefit interest groups like:
Domestic firms
Industries in a particular sector
Labor unions. Sunday, 05
February 2023
6. Contd…
Government intervention alters the competitive
landscape by hindering or helping the ability of firms to
compete internationally.
Government intervention is an important dimension of
country risk.
Sunday, 05
February 2023
8. Protectionism
Protectionism -- national economic policies that restrict
free trade. Usually intended to raise revenue or protect
domestic industries from foreign competition.
Customs -- the checkpoint at national ports of entry
where officials inspect imported goods and levy tariffs.
Sunday, 05
February 2023
9. Contd…
Protectionism is typically manifested by tariffs, nontariff barriers such as quotas, and arbitrary
administrative rules designed to discourage imports.
A tariff (also known as a duty) is a tax imposed by a government on imported products, effectively
increasing the cost of acquisition for the customer.
A nontariff trade barrier is a government policy, regulation, or procedure that impedes trade through
means other than explicit tariffs.
Trade barriers are enforced as products pass through customs, the checkpoints at the ports of entry in
each country where government officials inspect imported products and levy tariffs.
An often-used form of nontariff trade barrier is a quota, a quantitative restriction placed on imports of a
specific product over a specified period of time. Government intervention may also target FDI flows
through investment barriers that restrict the operations of foreign firms.
Sunday, 05
February 2023
10. Government Interventions – Key Instruments
Tariffs – a tax on imports
Nontariff trade barrier – government policy, regulation, or
procedure to discourage imports
Quotas – quantitative restriction on imports of a product during a
specific time
Local Content Requirement – Requirement that firms include a
minimum percentage of locally sourced material/inputs in the
production of a given product/service.
Subsidies
Countervailing Duties
Investment barriers – rules or laws that hinder foreign direct
investment Sunday, 05
February 2023
12. Consequences of Protectionism
• Reduced supply of goods to buyers
• Price inflation
• Reduced variety, fewer choices available to buyers
• Reduced industrial competitiveness
• Various adverse unintended consequences (e.g.,
while the home country dithers, other countries can
race ahead)
Sunday, 05
February 2023
13. General Rationale for Government Intervention
• Tariffs can generate substantial government
revenue. This is a key rationale for protectionism in
undeveloped economies.
• Helps ensure the safety, security, and welfare of
citizens. E.g., most countries have basic regulations to
protect the national food supply.
• Helps the government pursue broad economic, political,
and social objectives for the nation.
• Can serve the interests of the nation’s firms and
industries.
Sunday, 05
February 2023
14. Defensive Rationale for Government Intervention
• Protection of the national economy – weak or young
economies sometimes need protection from foreign
competitors. E.g., India imposed barriers to shield its
huge agricultural sector, which employs millions.
• Protection of an infant industry – a young industry
may need protection, to give it a chance to grow and
succeed. E.g., Japan long protected its car industry.
• National security – the United States prohibits exports
of plutonium and similar products to North Korea.
• National culture and identity – Canada restricts
foreign investment in its movie and TV industries. Sunday, 05
February 2023
15. Offensive Rationale for Government Intervention
• National strategic priorities – protection helps ensure the
development of industries that bolster the nation’s economy.
Countries create better jobs and higher tax revenues when they
support high value-adding industries, such as IT, automotive,
pharmaceuticals, or financial services.
• Increase employment – protection helps preserve domestic
jobs, at least in the short term. However, protected industries
become less competitive over time, especially in global markets,
leading to job loss in the long run.
Sunday, 05
February 2023
16. Types and Effects of Government Intervention
Sunday, 05
February 2023
19. Tariffs are Widespread
• Harmonized code – standardized worldwide system that determines
tariff amount.
The amount of a tariff is determined by examining a product’s
harmonized code. Products are classified under about 8,000 different
unique codes in the harmonized tariff or harmonized code schedule, a
standardized system used worldwide. Without this system, firms and
governments might have differing opinions on product definitions and
the tariffs charged.
Import tariffs can generate substantial revenue for national
governments. This helps explain why they are common in developing
economies. Even in advanced economies, tariffs provide a significant
source of revenue for the government. The United States charges tariffs
on many consumer, agricultural, and labor-intensive products.
Interestingly, the United States typically collects as much tariff revenue
on shoes as on cars— about $1.9 billion in 2008. The European Union
applies tariffs of up to 215 percent on meat, 116 percent on cereals,
and 133 percent on sugar and confectionary products.
Sunday, 05
February 2023
20. Tariffs are Widespread
• Harmonized code – standardized worldwide system
that determines tariff amount.
• In developing economies, tariffs are common.
• In advanced economies, tariffs still provide significant
revenue.
• For example, in a given year the U.S. collects more
tariff revenue on shoes than on cars (e.g., $1.63
billion versus $1.60 billion).
• The European Union applies tariffs up to 215% on
meat, 116% on cereals, and 17% on tennis shoes.
Sunday, 05
February 2023
21. Economic Freedom
• Economic freedom is the absence of government
coercion so that people can work, produce, consume,
and invest however they want.
• The Index of Economic Freedom assesses the rule of
law, trade barriers, regulations, and other criteria.
• Virtually all advanced economies are ‘free.’
• Emerging markets are either ‘free’ or ‘mostly free.’
• Most developing economies are ‘mostly unfree’ or
‘repressed.’
• Economic freedom flourishes with appropriate
intervention; too much regulation harms the economy
Sunday, 05
February 2023
22. What is Economic Freedom Index?
One way of evaluating the effects of government intervention is
to examine each nation’s level of economic freedom, defined as
the “absence of government coercion or constraint on the
production, distribution, or consumption of goods and services
beyond the extent necessary for citizens to protect and maintain
liberty itself.
In other words, people are free to work, produce, consume, and
invest in the ways they feel are most productive.
An Index of Economic Freedom is published annually that
measures economic freedom in 161 countries by the Heritage
Foundation, USA.
Sunday, 05
February 2023
23. India ranks 130 in Index of Economic Freedom –
Up by 13 spots
India has jumped 13 places in the last one year to be earn 130th spot in the latest
annual Index of Economic Freedom released by a top American think-tank. In 2017,
India with a score of 52.6 points was ranked at 143 among 180 countries, two spots
below neighbour Pakistan, according to the Index of Economic Freedom.
China with 57.4 points was ranked 111 in the 2017 index of The Heritage Foundation,
an American conservative public policy think-tank based in Washington.
As per the latest Index of Economic Freedom, China has jumped one spot and
Pakistan is now at 131 position.
India’s economic freedom score is 54.5, making its economy the 130th freest in the
2018 Index, the Heritage Foundation
Sunday, 05
February 2023
24. Evolution of Government Intervention
• Protectionist tendencies, the Great Depression, and
isolationism shaped early 20th century world trade.
• The Smoot-Hawley Act (1938) raised U.S. tariffs to
more than 50%
• Progressive trade policies reduced tariffs after WW-II.
In 1947, 23 nations signed the General Agreement on
Tariffs and Trade (GATT). The GATT:
reduced tariffs via continuous worldwide trade
negotiations;
created an agency to supervise world trade; and
created a forum for resolving trade disputes.
Sunday, 05
February 2023
25. The GATT (cont’)
• The GATT introduced the concept of most
favored nation (renamed normal trade
relations) by which each member nation agreed
to extend the tariff reductions covered in a trade
agreement with one country to all other countries.
A concession to one became a concession to all.
• In 1995 the GATT was superseded by
the World Trade Organization (WTO)
and grew to include 150 member nations.
• The GATT and WTO presided over the
greatest global decline in trade barriers in history. Sunday, 05
February 2023
26. Market Liberalization in China
• In 1949, China established communism and
centralized economic planning.
• Agriculture and manufacturing were controlled by
inefficient state-run industries.
• The country was long closed to international trade.
• In the 1980s, China liberalized its
economy.
• In 2001, China joined the WTO.
• China is now a key member of the
world trading system.
Sunday, 05
February 2023
27. Market Liberalization in India
• Following independence from Britain in 1947, India
adopted a quasi-socialist model of isolationism and
government control.
• High trade barriers, state intervention, a large public
sector, and central planning resulted in poor
economic performance.
• In the 1990s, markets opened to foreign trade and
investment; state enterprises were privatized.
• Protectionism has declined, but high
tariffs (averaging 20%) and FDI
limitations remain. Sunday, 05
February 2023
28. How Firms Should Respond to
Government Intervention
• Research to gather knowledge and intelligence.
Understand trade and investment barriers abroad. Scan
the business environment to identify the nature
of government intervention.
• Choose the most appropriate
entry strategies. Most firms choose exporting as their
initial strategy, but if high tariffs are present, other
strategies should be considered, such as licensing, or FDI
and JVs that allow the firm to produce directly in the
market. Sunday, 05
February 2023
29. Contd….
• Take advantage of foreign trade zones. FTZs
are areas where imports receive preferential tariff
treatment intended to stimulate local economic
development. E.g., a successful experiment with
FTZs has been the maquiladoras — export-
assembly plants in northern Mexico.
• Seek favorable customs classifications for
exported products. Reduce exposure to trade
barriers by ensuring that products are classified
properly. Sunday, 05 February 2023
30. Contd….
• Take advantage of investment incentives and
other government support programs.
• Lobby for freer trade and investment.
Increasingly, nations are liberalizing markets in
order to create jobs and increase tax revenues.˘ Sunday, 05
February 2023
Examples
• The government of Hong Kong put up much of the cash to
build the Hong Kong Disney Park.
• Mercedes-Benz received several hundred million dollars in
subsidies to build a plant in the U.S. state of Alabama.
National Strategic Priorities Government intervention sometimes aims to encourage the development of industries that bolster the nation’s economy. It is a proactive variation of the infant industry rationale and related to national industrial policy. Countries with many high-tech or high-value-adding industries, such as information technology, pharmaceuticals, car manufacturing, or financial services, create better jobs and higher tax revenues than economies based on low-value-adding industries, such as agriculture, textile manufacturing, or discount retailing. Accordingly, governments in Germany, Japan, Norway, South Korea, and numerous other countries have devised policies that promote the development of relatively desirable industries. The government may provide financing for investment in high-tech or high-value-adding industries, encourage citizens to save money to ensure a steady supply of loanable funds for industrial investment, and fund public education to provide citizens the skills and flexibility they need to perform in key industries.
Increasing Employment Governments often impose import barriers to protect employment in designated industries. Insulating domestic firms from foreign competition stimulates national output, leading to more jobs in the protected industries. The effect is usually strongest in import-intensive industries that employ much labor. For example, the Chinese government has traditionally required foreign companies to enter its huge markets through joint ventures with local Chinese firms. This policy creates jobs for Chinese workers. For example, a joint venture between Shanghai Automotive Industry Corporation (SAIC) and Volkswagen created jobs in China.
One way of evaluating the effects of government intervention is to examine each nation’s level of economic freedom, defined as the “absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself. In other words, people are free to work, produce, consume, and invest in the ways they feel are most productive.” An Index of Economic Freedom is published annually that measures economic freedom in 161 countries.
