DONE—WTO - BusAdm 555Exam 2: CaseWTO...

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BusAdm 555—Exam 2: Case—WTO Economic Reasons for Government Intervention Infant Industry Argument—Protect emerging industries during development from global competition. Only successful if the new industry works towards efficiency. Strategic Trade Policy—Government Policy aimed at helping domestic firm achieve economies of scale or achieve first mover status. Follows logic of new trade theory—Applied when the world market will only support a few firms. Political Reasons for Government Intervention Protecting industries deemed important for national security Retailing to unfair foreign competition Protecting consumers from “dangerous” products Furthering the goals of foreign policy Protecting the human rights of individuals in exporting countries Gain influence/power Cultural Reasons for Government Intervention Protect national identity Maintain religious beliefs Instruments of Trade Policy Used by governments to intervene in international trade. 1. Tariffs 2. Subsidies 3. Import/Export Quotas 4. Voluntary Export Restraints 5. Local Content Requirement 6. Anti-Dumping Policies 7. Administrative Policies 8. Embargoes Tariffs Tax levied on imports that effectively raises the cost of imported products relative to domestic products. Specific tariffs are levied as a fixed charge for each unit of a good imported. Ad valorem tariffs are levied as a proportion of the value of the imported good. Important for businesses to understand rules —U.S. tuna example: 35% tariff on imported oil-packed canned tuna, 12.5% tariff on imported water-packed canned tuna, 1.5% tariff on imported cooked non-canned tuna. Subsidy Government payment to a domestic producer. Help domestic producers compete against low-cost foreign imports, and gain export markets. Cash grants, low-interest loans, tax breaks, government equity participation in domestic firms. Import/Export Quota
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This note was uploaded on 11/08/2010 for the course BUS ADM 555 taught by Professor Makhidja during the Fall '09 term at Ohio State.

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DONE—WTO - BusAdm 555Exam 2: CaseWTO...

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