Answer to Question #268932 in Finance for Robert

Question

1) Explain five methods a country can employ in international trade restrictions (10marks)

2) Discuss the advantages of export processing zone (EPZ) in international finance (10marks)

Answer 1

a.

1.Tarriff barriers. This is a tax on certain imports. They raise the price of imported goods, making them less competitive.

 2.Non-tariff barriers. This includes rules and regulations that make trading difficult. Transactions can be difficult, for example, if a foreign company has to comply with complex business laws.

 3.Quota. Involves limitation of import quantities

 4.Voluntary Export Restraint(VER). As with quotas, here countries agree to limit their imports. It is used by the US to import Japanese cars.

 5.Subsidies.Domestic government subsidies can give local businesses a competitive advantage.

b.Advantages of Export Processing Zone

With more than 130 countries offering free economic zones within their borders, the benefits of establishing free economic zones appear very clear to developing countries.

The obvious benefits are:

1 Foreign exchange growth through export growth

2. Job creation

3. Foreign direct investment (FDI) in host country

4. Technology deployment in country

5. Feedback generation from domestic EPZ