Chapter 6 Student P11

Chapter 6 Student P11 - Chapter 6 The Political Economy of...

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Chapter 6 The Political Economy of International Trade
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Upon completion of this material, you should be able to: Describe the instruments of trade policy and evaluate their impact. Discuss the principles of the World Trade Organization (WTO) Trading System. Summarize the current challenges for the WTO. Explain the goals and the reasons for the lack of progress in the Doha Round of negotiations.
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Instruments of Trade Policy Tariffs Subsidies Import Quotas Voluntary Export Restraints Local Content Requirements Administrative Trade Policies Antidumping Policies
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Tariffs Tariffs are duties imposed by a government on imported or exported goods. Specific tariffs are levied as a fixed charge for each unit. Ad valorem tariffs are levied as a proportion of the value of the good.
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Outfoxing the Chicken Tax To avoid a 25% U.S. tariff on foreign-made commercial vans, Ford ships its Transit Connect vans from Turkey with rear side windows and back row seats, allowing the vehicles to be classified as passenger vans and subject to only a 2.5% tariff. Once through customs, the rear windows and seats are removed and all the material scrap sent to be recycled. Removing the parts costs Ford hundreds of dollars but it saves thousands of dollars in tariffs.
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Subsidies Subsidies are government payments to domestic producers that lower production costs. Government subsidies may be direct payments or indirect support. Subsidies, especially agricultural subsidies, are controversial since they can result in trade distortion.
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Import Quotas Restriction on the quantity of a good to be imported into a country. Can be enacted by issuing import
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Chapter 6 Student P11 - Chapter 6 The Political Economy of...

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