Answer to Question #51787 in Economics for rini

Question

Elaborate the impact of various trade instruments on international business.

Answer 1

1) Tariffs - oldest form of trade policy:
Good for government, protects domestic producers, reduces efficiency, are bad for consumers, increases cost of goods.
2) Government payment to a domestic producer: cash grants, low-interest loans, tax breaks, government equity participation in the company. Subsidy revenues are generated from taxes and they encourage over-production, inefficiency and reduce trade.
3) Import quota – a restriction on the quantity of some good imported into a country. Cuts the quantity of the foreign production.
4) Voluntary export restraint (VER) - Quota on trade imposed by exporting country, typically at the request of the importing country.
5) Administrative policies - Bureaucratic rules designed to make it difficult for imports to enter a country.
6) Anti dumping policies Defined as:
o Selling goods in a foreign market below production costs
o Selling goods in a foreign market below fair market value
• Result of:
o Unloading excess production.
o Predatory behavior