Answer to Question #51787 in Other Economics for rini
Elaborate the impact of various trade instruments on international business.
1) Tariffs - oldest form of trade policy: Good for government, protects domestic producers, reduces efficiency, are bad for consumers, increases cost of goods. 2) Government payment to a domestic producer: cash grants, low-interest loans, tax breaks, government equity participation in the company. Subsidy revenues are generated from taxes and they encourage over-production, inefficiency and reduce trade. 3) Import quota – a restriction on the quantity of some good imported into a country. Cuts the quantity of the foreign production. 4) Voluntary export restraint (VER) - Quota on trade imposed by exporting country, typically at the request of the importing country. 5) Administrative policies - Bureaucratic rules designed to make it difficult for imports to enter a country. 6) Anti dumping policies Defined as: o Selling goods in a foreign market below production costs o Selling goods in a foreign market below fair market value • Result of: o Unloading excess production. o Predatory behavior