1、Trade and Investment PoliciesLearning ObjectivesRationale and Goals of Trade and Investment PoliciesRationale and Goals of Trade and Investment Policies Government policies are designed to regulate,direct,and protect national activities.The exercise of these policies is the result of national sovere
2、ignty,which provides a government with the right to shape the environment of the country and its citizens.The domestic policy actions of most governments aim to increase the standard of living of citizens and to improve the quality of life,and to achieve full employment.These policies affect interna
3、tional trade and investment indirectly.Rationale and Goals of Trade and Investment Policies(cont.)In more direct ways,a country may also pursue technology transfer from abroad or the exclusion of foreign industries to the benefit of domestic infant firms.Government officials can also develop regulat
4、ions on imports to protect citizens.Nations institute foreign policy measures designed with domestic concerns in mind but explicitly aimed to exercise influence abroad.A major foreign policy goal is national security.The Price of ProtectionismIndustry Total Costs toNumber ofCost perConsumersJobs Sav
5、edJob Saved(in$millions)Textiles and apparel$27,000640,000$42,000Carbon Steel6,8009,000$750,000Autos5,80055,000$105,000Dairy products5,50025,000$220,000Shipping3,00011,000$270,000Meat1,80011,000$160,000The Effects of TariffsIncrease Inflationary pressures.Special interests privileges.Government cont
6、rol and political considerations in economic matters.The number of tariffs they beget via reciprocity.Weaken Balance-of-payments positions.Supply-and-demand patterns.International understanding(they can start trade wars).Restrict Manufacturer supply sources.Choices available to consumers Competition
7、.The International Trade Organization In 1948,the ITO represented an agreement among 53 countries to:Aid in international commercial policies,restrictive business practices,commodity agreements,employment and reconstruction,and economic development and international investment.It developed a constit
8、ution for a new United Nations agency.The ITO was never implemented.The General Agreement on Tariffs and Trade GATT started in 1947 as a set of rules to ensure nondiscrimination,transparent procedures,the settlement of disputes,and the participation of the lesser-developed countries in international
9、 trade.GATT used tariff concessions to limit the level of tariffs that would be imposed on other GATT members.The Most Favored Nation clause calls for each member country to grant every other member country the same treatment that it accords with any other country with respect to imports and exports
10、.The World Trade Organization The WTO was introduced in 1995 and administers international trade and investment accords.In 2002,the Doha Round ended the first stage of implementation.The aim is to further hasten implementation of liberalization to help the impoverished and developing nations.What WT
11、O Means to Different Industries Banks will be allowed to compete freely in South Korea and other places where they are restricted.Insurance companies will be able to sell policies in India,one of the Worlds most tightly closed markets.Movies will have better protection from Thai film counterfeiters.
12、Pharmaceuticals will have better protection from Argentine imitators.Computer software makers will have better protection from Brazilians who rip off copyrighted programs.Gainers Glassware tariffs as high as 30 percent on inexpensive drinking glasses will be reduced,threatening some 40,000 jobs.Text
13、iles will gradually lose quotas and tariffs that protect 1.1 million U.S.workers-and add 50 percent to wholesale prices of clothing.Peanuts will lose quotas that limit imports to a handful and that protect 19,000 American farmers.Dairy imports of foreign cheese,now limited to 19,000 tons a year,will
14、 go up,hurting 240,000 U.S.farmers.Sugar import ceilings,now 25 percent of the nine million tons the United States uses each year,will go,threatening 11,000 sugar beet and cane growers.What WTO Means to Different IndustriesLosersMany Japanese Products,like Toyotas,are produced or assembled in the U.
15、S.Who Builds the Boeing 777?Changes in the Global Policy Environment Three major changes have occurred over time in the global policy environment:a reduction of domestic policy influence;a weakening of traditional international institutions;and a sharpening of the conflict between industrialized and
16、 developing nations.Reduction of Domestic Policy InfluencesCurrency flows have increased from an average daily trade volume of$18 billion in 1980 to$1.2 trillion in 2001.As a result,currency flows have begun to set the value of exchange rates independent of trade,which in turn have now begun to dete
17、rmine the level of trade.The interactions between global and domestic financial flows have severely limited the influence of governments.To regain influence,some governments have tried to restrict world trade by erecting barriers,charging tariffs,and implementing import regulations.Weakening of Inte
18、rnational Institutions The intense links among nations and the new economic environment resulting from new market entrants and the encounter of different economic systems are weakening the WTO.The International Monetary Fund does not have the funds available to satisfy the needs of all struggling na
19、tions.The World Bank has been unsuccessful in furthering the economic goals of the developing world and newly emerging market economies.Some claim that its bank policies have created more poverty.Conflict Between Industrialized and Developing Nations In the past,it was hoped that the gap between ind
20、ustrialized and developing nations would gradually be closed.Although several less-developed nations have emerged as newly industrialized countries,even more nations are facing grim economic futures.An increase in environmental awareness has led to a further sharpening of the conflict.Policy Respons
21、es to Changing ConditionsPolicy Responses to Changing ConditionsPolicy Responses to Changing ConditionsPolicy Responses to Changing ConditionsRestrictions of Imports Many countries including the United States have passed antidumping laws which help domestic industries by restricting foreign products
22、 being sold below the cost of production,or at prices lower than those in the home market.Imports are also restricted by nontariff barriers,such as buy-domestic campaigns.It is difficult to remove these barriers.Imports can also be reduced by tightening market access and entry of foreign products th
23、rough involved procedures and inspections.Effects of Import Restriction Import control may mean that the most efficient sources of supply are not available,resulting in second-best products or higher costs for restricted supplies.Import control may result in the downstream change in the composition
24、of imports.Due to inefficiency,import controls may cause a lag in technological advancements.Restrictions of Exports Nations control their exports for reasons of short supply,national security and foreign policy purposes,or the desire to retain capital.National security controls are placed on weapon
25、s and high-technology exports.Although restriction of exports is a valuable international relations tool,it may give a countrys firms the reputation of being unreliable suppliers and may divert orders to firms of other nations.Export Promotion Export promotion is designed to help firms enter and mai
26、ntain their position in international markets and to match or counteract similar efforts by other nations.Various approaches toward export promotion include:knowledge transfer direct or indirect subsidization of export activities reducing governmental red tape for exporters export financing and mixe
27、d aid credits to exporters altered tax legislation for nationals living abroadImport Promotion Countries that maintain large balance-of-trade surpluses use import promotion measures.The Japan External Trade Organization(JETRO)has begun to focus on the promotion of imports to Japan.Restrictions on In
28、vestment Many nations that lack necessary foreign exchange reserves restrict exports of capital,because capital flight can be a major problem.Once governments impose restrictions on the export of funds,the desire to transfer capital abroad increases.This creates problems for gaining new outside inve
29、stors.Investment PromotionFiscal IncentivesFinancial IncentivesNonfinancial IncentivesInvestment Promotion(cont.)Fiscal incentives are specific tax measures designed to attract the foreign investor,including special depreciation allowances,tax credits or rebates,special deductions for capital expend
30、itures,tax holidays,and reduction of tax burdens.Financial incentives offer special funding for the investor by providing land or building,loans,and loan guarantees.Nonfinancial incentives can consist of guaranteed government purchases,special protection from competition,and investments in infrastru
31、cture facilities.U.S.Perspective on Trade and Investment Policies The U.S.seeks a positive trade policy rather than reactive,ad hoc responses to specific situations.Protectionist legislation can be helpful,provided it is not enacted into law.Trade promotion authority gives Congress the right to acce
32、pt or reject treaties and agreements,but reduces the amendment proceduresInternational Perspective on Trade and Investment Policies From an international perspective,trade and investment negotiations must continue.In doing so,trade and investment policy can take either a multilateral or bilateral ap
33、proach:bilateral negotiations are carried out mainly between two nations.multilateral negotiations are carried out among a number of nations.Specific Limitations on Trade:Quotas Import Licensing requirements Proportion restrictions of foreign to domestic goods(local content requirements)Minimum impo
34、rt price limits EmbargoesCustoms and Administrative Entry Procedures:Valuation systems Antidumping practices Tariff classifications Documentation requirements FeesTypes of Non-tariff BarriersStandards:Standard disparities Intergovernmental acceptances of testing methods and standards Packaging,label
35、ing,marking and safety standardsTypes of Non-tariff BarriersGovernment Participation in Trade:Government procurement policies Export subsidies Countervailing duties Domestic assistance programsTypes of Non-tariff BarriersCharges on imports:Prior import deposit subsidies Administrative fees Special s
36、upplementary duties Import credit discriminations Variable levies Border taxesOthers:Voluntary export restraints Orderly marketing agreementsMonetary BarriersBlocked CurrencyDifferential Exchange RateGovernment Approval to Secure Foreign ExchangeExchange PermitBargaining Position of Multinational Corporation(MNC)and Host CountryGlobal Financial InstitutionsInternational Monetary Fund(IMF)World Bank Group
