Professional Documents
Culture Documents
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þeasons for £overnment |ntervention in Trade
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ÿ |n the economic view, government intervention in
international trade protects local infant industries
ÿ By implementing protectionism measures, newly
founded industries will have the support to grow
and develop to stay competitive in the
international economy
ÿ The measures also enable the industries to
become self-sufficient
ÿ |n a free market economic system, measures
such as tariffs must be completely eradicated
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ÿ £ained importance in international trade since the
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ÿ This policy proposes that the government may
provide required aid to local firms to confine
economic profits from foreign competitors
ÿ Such assistance entails government support for
certain µstrategic¶ industries (such as high-
technology industries) that are important to future
domestic economic growth and that provide
widespread benefits (externalities) to society
(Carbaugh, )
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would
deprive Canadians of the ability to read about
themselves in
and
¢lthough the tax was eventually abolished due to
US protests, the Canadian government continues to
examine other methods of preserving its culture
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(Trade Policy |nstruments
ÿ Tariff
¢ tax (duty) enforced on a product when it crosses
national boundaries
ÿ |mport tariff
Tax levied on an imported product
The most widespread tariff
ÿ Export tariff
Tax imposed on an exported product
Less common tariff
Often used by developing nations
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ÿ Designed to shield import-competing producers
from foreign competition
ÿ £enerally not intended to totally prohibit imports
from entering a country
ÿ Place foreign producers at a competitive
disadvantage when selling in the domestic
market
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ÿ |mposed for the purpose of generating tax
revenues and may be placed on either exports or
imports
ÿ Over time, tariff revenues have decreased as a
source of government revenue for industrial
nations, including the US
|n , tariff revenues constituted more than of US
government receipts
þecords at the millennium show the figure to be
ÿ However, many developing nations currently rely
on tariffs as a major source of government
revenue
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ÿ Expressed as a fixed percentage of the value of
the imported product
ÿ ¢d valorem tariffs usually lend themselves more
satisfactorily to manufactured goods, because they
can be applied to products with a wide range of
grade variations
ÿ ¢s a percentage applied to the value of a product,
an ad valorem tariff can be distinguished in small
differentials in product quality to the extent that
they are reflected in product price
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ÿ Compound duties combine both characteristics of
specific and ad valorem tariffs
ÿ Often applied to manufactured products
embodying raw materials that are subject to tariffs
ÿ Thus, the specific portion of the duty neutralizes
the cost disadvantage of domestic manufacturers
due to tariff protection granted to domestic
suppliers of raw materials, and the ad valorem
portion of the duty grants protection to the finished-
goods industry
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*The effects of international trade on the economy
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$#
ÿ There are many different ways to classify
subsidies based on purpose for the subsidy, the
recipients of the subsidy, or the source of funds
(government, consumer, general tax revenue,
etc )
ÿ |n economics, one of the primary ways to
classify subsidies is by the means of distributing
the subsidy