GOVERNMENT INFLUENCE ON TRADE

Why do countries seek to influence trade?

To attain economic, social, or political

objectives Personal political longevity

Economic Rationales for Governmental Intervention Economic rationale Preventing unemployment Protecting infant industries Promoting industrialization Improving comparative position

Non economic rationales

Maintaining essential industries Dealing with unfriendly countries Maintaining or extending spheres of influence Preserving national identity

Fighting unemployment Import restrictions to create domestic employment. May lead to retaliation by other countries Are less likely retaliated against effectively by small economies May decrease export jobs because of lower incomes abroad.

Protecting infant industries

Underlying assumptions

Risks in designating industries

-Determining probability of success -Identifying qualified industries

Developing an industrial base

Surplus workers Investment inflows Diversification Growth in manufactured goods

Import substitution and export-led development

Nation building

Economic relationships with other country

Balance of trade adjustments

Comparable access or fairness

Restrictions as a bargaining tool Price control objectives

Dumping
Optimum-tariff theory

Non economic rationales

Maintaining essential industries

Dealing with unfriendly countries

Maintaining or extending spheres of influence Preserving national identity

Instruments of Trade Control

Tariffs

-export tariff -transit tariff -import tariff

 Nontariff barriers- direct price influences

- Subsidies

Agricultural Subsidies Overcoming market imperfections Aid and loans customs valuation Valuation problems Other direct price influences

Nontariff barriers- Quality Controls - Quotas - Voluntary Export Restraint -Embargoes - Buy Local Legislation -Standards and labels - Specific Permission Requirements - Administrative Delays -Reciprocal requirements - countertrade - Restrictions on services: essentiality, standards, immigration.

List of countries under embargo China (by EU and US), arms embargo, enacted in response to the Tiananmen Square protests of 1989 Iran (by US and US international allies),[5][6] notably bar nuclear, missile and many military exports to Iran and target investments in oil, gas and petrochemicals, exports of refined petroleum products, as well as the Islamic Revolutionary Guard Corps, banks, insurance, financial transactions and shipping. enacted 1979, increased through the following years and reached its tightest point in 2010 [7] North Korea (by UN, USA, EU),[8] luxury goods (and arms), enacted 2006 Pakistan (by UK),[9] nuclear exports restriction, enacted 2002 Turkish Republic of Northern Cyprus, (by UN), consumer goods, enacted 1975[citation needed] Cuba (by US), arms, consumer goods, money, enacted 1960 Georgia (by Russia), agricultural products, wine, mineral water, enacted 2006 Philippines (by Hong Kong), consumer goods, enacted 2010[citation needed] Libya (by United Nations), weapons, enacted 2011 after mass killings of Libyan protesters/rebels. Japan, animal shipments due to lack of infrastructure and radiation issue after the 2011 9.0 earthquake aftermath. Indonesia, ( by Australia ) cattle, enacted since 2011 Gaza Strip by Israel since 2001