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Exam_2_Material_Review_rdcd_original to post to BB

Increased employmentexports raw materials components

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Increased employment/exports (raw materials/ components / machinery) Transfer of learning to home DRAWBACKS Economic jobs, foreign exchange, technological advantages Military, security related Circumvent social programs: environmental, labor standards (sweatshops)
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Government Policy and FDI Home country Outward FDI encouragement Risk reduction policies: financing, insurance, tax incentives, politics * Outward FDI restrictions Sanctions, taxes * Host country Inward FDI encouragement Low interest, tax incentives Infrastructure improvement Inward FDI restrictions Ownership restrictions Performance demands: local content, technology transfer     Country A ( home country ) Country B (host country)     Country A ( home country ) Country B (host country)     Country A ( home country ) Country B (host country)     Country A ( home country ) Country B (host country) !
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4. TRADE POLICIES The International Trade Wars The “Steel” War The “Orange Juice” War The “Banana” War The “Mad Cow” War The Timber War
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Rationale for International Trade Policies GENERAL GOAL OF THE GOVERNMENTS: - Protect the citizens SPECIFIC GOALS OF THE GOVERNMENTS: take care of 1 . Unemployment 2. Infant industry protection 3. Industrialization 4. Relationship with other countries 5. Conservation of natural resources 6. National defense
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GOVERNMENTAL TRADE POLICIES: How? TYPES * Tariffs * Nontariff Barriers - Quotas - Other (12) EFFECT * Effect on Price * Effect on Quantity VISIBILITY (transparency issue) * Tariffs * Quotas
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TYPES OF TARIFFS * Tax on imports * 1 st type: Ad valorem % over invoice total amount * 2 nd type: Specific tariffs - fixed amount ($) on a physical unit Ex. barrel of oil, sacks of coffee
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NONTARIFF BARRIERS: Subsidies Subsidies - direct (payments to exporters) - indirect - export credit - promotion of products abroad - exchange rate manipulation ( ex. China, Japan, U.S.) - money to non-exporters to face foreign competition Origin of resources: taxpayers (individuals)
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NONTARIFF BARRIERS: Quotas Quotas - import quotas - export quotas - embargo Terminology: large and small quota VER = Voluntary Export Restrains (“export quota”) - agreement between countries Country A Country B CUSTOMS $ Export Qty Limits
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Nontariff Barriers Overview Effect on Price -- Subsidies / Incentives -- Exchange Rate Manipulations -- Customs Valuation -- Advance Payment -- Minimum Prices Effect on Quantity (import quantity controls) -- Quotas, Embargos -- "Buy local" Legislation -- Standards / Specific Permissions / Licenses -- Foreign Exchange Control / Administrative Delays 3 Special cases -- Voluntary Export Restrain -- Public Boycotts -- Market Barriers
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TARIFFS' EFFECT ON ECONOMY USE OF TARIFFS INCREASES: - inflation - groups' privileges - government political power - the number of tariffs USE OF TARIFFS WEAKENS: - balance of payment positions - supply and demand pattern (market imperfection) - international trade peace USE OF TARIFFS RESTRICTS: - manufacturers' supply sources - choices available to consumers - competition
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