International Business-Goverment 6.ppt

1、Business-GovernmentTrade Relations,Chapter 6,Learning Objectives,Describe the political, economic, and cultural motives behind government intervention in trade. List and explain the methods governments use to promote international trade. List and explain the methods governments use to restrict inter

2、national trade. Discuss the importance of the World Trade Organization in promoting free trade.,Case StudyFDA banning imports of fruit milk, and vegetables from japan,Why Do Governments Intervene in Trade?,Political Motives Economic Motives Cultural Motives,Political motives,Protect Jobs : Politicia

3、ns efforts to protect jobs can draw attention away from free trades real benefit. Preserve National Security : Industries considered essential to national security often receive government-sponsored protection. Respond to “unfair” trade : Many nation argue that it makes no sense for one nation to al

4、low free trade if other nation actively protect their own industries. Gain Influence : Governments of the worlds largest nations may become involved in trade to gain influence over smaller nations.,Economic motives,Protect Infant Industries : Countrys emerging industries need protection from interna

5、tional competition during their development phase until they become sufficiently competitive internationally. Pursue Strategic Trade Policy : Government intervention can help companies take advantage of economies of scale and be the first mover in their industries.,Cultural motives,Nations often res

6、trict trade in goods and services to achieve cultural objectives, the most common being protection of national identity. Cultural Influence of the united state : The United States is seen by many around the world as a threat to local culture. The reason is the global strength of the united states in

7、 entertainment and media and consumer goods.,Methods of Promoting and restricting trade,Methods of Promoting Trade,Subsidies : Financial assistance to domestic producers in the form of cash payments, low interest loans, tax breaks, product price supports, or other form. Export Financing : Government

8、 can offer loans that a company could otherwise not obtain or charge them an interest rate that is lower than the market rate. Foreign Trade Zones : Designated geographic region in which merchandise is allowed to pass through with lower customs duties (taxes) and 0r fewer customs procedures. Special

9、 Government Agencies : Agencies can be particularly helpful to small and medium-sized business that have limited financial resources.,Methods of Restricting Trade,Tariffs : Government tax levied on a product as it enters or leaves a country. Nontariff barrier limits the availability of an imported p

10、roduct, which increases its price indirectly and, therefore, reduces its appeal to buyers. Quotas : Restriction on the amount (measured in units or weight) of a good that can enter or leave a country during a certain period of time.,Quotas,Import Quotas and Export Quotas Voluntary export restraints

11、: Countries normally self-impose a voluntary export restraint in response to the threat of an import quota or total ban on the product by an importing nation. Tariff-Quotas : Hybrid form of trade restriction. Lower tariff rate for a certain quantity of imports and a higher rate for quantities that e

12、xceed the quota.,How a Tariff-Quota works Source : Based on World Trade Organization Web site (),Methods of Restricting Trade,Embargoes : Complete ban on trade is one or more products with a particular country Local Content Requirements : Force companies from other nations to use local re

13、sources in their production processes. Administrative Delays : Regulatory Control or bureaucratic rules designed to impair the flow of imports into a country. Currency Controls : Restrictions on the convertibility of a currency into other currencies.,Global Trading System,System of multilateral agre

14、ements was developed that became known as the General Agreement on Tariffs and Trade(GATT) Treaty designed to promote free trade by reducing both tariff and nontariff barriers to international trade. Between 1947 and 1988, it helped to reduce average tariffs from 40 percent to 5 percent and multiply

15、 the volume of international trade by 20times. Revision of the treaty was necessary and in 1986 a new round if trade talks began-URUGUAY ROUND,Uruguay Round of negotiations,The Uruguay Round Agreement on Agriculture, administered by the WTO, brings agricultural trade more fully under the GATT. It pr

16、ovides for converting quantitative restrictions to tariffs and for a phased reduction of tariffs. Short and straightforward in the early years, negotiations later became protracted as issues grew more complex.,The Rounds of GATT,More Countries , More Topics,Source : Based On “About the WTO.” World T

17、rade Organization Web Site (),GATT,General Agreement on Trade in Services(GATS) extended the principle of nondiscrimination to cover international trade in all service. GATS created during the Uruguay round identifies four different forms that international Trade in services can take : Cr

18、oss-border supply Consumption abroad Commercial presence Presence of natural persons,Agreement on intellectual property : Agreement on trade-related Aspects on Intellectual Property(TRIPS) to help standardize intellectual property rules around the world. Agreement on agricultural subsidies : Increas

19、ed exposure of national agricultural sectors to market forces and increased predictability in international agricultural trade. The agreement forces countries to convert all nontariff barriers to tariffs.,GATT,Global Trading System,Greatest achievement of the Uruguay Round was the creation of the Wo

20、rld Trade Organization(WTO) WTO are to help the free flow of trade to help negotiate further opening of markets, and to settle trade disputes between its members. WTO was carried over from GATT is the principle of nondiscrimination called normal trade relations(most favored nation status) WTO replac

21、ed the institution of GATT but absorbed the GATT agreements into its own agreements.,Dispute settlement in the WTO,WTO agreements are essentially contracts between member nations that commit them to maintaining fair and open trade policies. Offenders must realign their trade policies according to WT

22、O guide-lines or suffer financial penalties and Trade sanctions. Penalize offending member nations, the WTOs dispute settlement system is the spine of the global trading system,Dumping and the WTO,WTO allow a nation to retaliate against dumping if it can show that dumping is actually occurring, can calculate the damage to its own companies, and can