Transcript 2.02 Exemplify how and why nations develop trade barriers

2.02 Exemplify how
and why nations
develop trade barriers
and support export
activities
2.02
 Why
do some Americans
worry about trading with
China?


American jobs are lost
China protects domestic products
• Difficult for the United States to sell to China
• Apple, Facebook, Yahoo!, Cisco, Google, & Microsoft
have all been targets of Chinese government

Manipulate currency rates
• China prints more of its money & buys US dollars with it
• This increases the supply of its currency (Yuan)
• Keeps exports cheap but allows them to stockpile US
dollars which in time creates issues
2.01

Practice Quiz available online via Edmodo


Everyone needs to take it by Friday
Key terms





Absolute advantage
Comparative Advantage
Opportunity cost
Commodity
Factors of production
• Natural, Human, & Capital
Agenda

15 minutes to finalize paper and
submit via Edmodo


If done take the practice quiz for 2.01
2.02 notes & activity
Current Events

Workplace Concerns

https://www.youtube.com/watch?v=FfIf24SET8

Do you think that employer’s should
monitor social media sites of
employees?
Why limit international
trade?

Trade barriers –


Government placed restrictions on trade
Three main reasons to implement trade
barriers:

Infant industry argument - based on idea that
a developing/emerging industry needs time to
become globally competitive
• Allows new companies a chance to compete without the
threat of International competition
• Once it becomes substantial; barriers are reduced
Why limit international trade? (con’t)

National security argument - based on
idea that a country does not want to
become dependent upon other countries
for products

Japan taxes the import of rice to protect domestic
farmers

Land in Japan could be used for other things;
however, Japan would be reliant on other
countries for its main food source
Why limit international trade?
(con’t)

Free trade favors rich countries argument
– based on idea that large, developed
countries have comparative advantages in
many areas.
 Canadians wary of US dominating their
media market.
 France has worked to protect its TV and
film industry from US domination
Review

Main reasons trade barriers are
implemented:

Protect select industries, interests, &
culture of country

Prevent rich countries from being too
influential
Commercial Policies
When conducting business in another country you
have to know the rules and regulations you will
encounter


Know American policies plus countries you choose to
do business with
Commercial policies - regulations & restrictions
countries use to control international trade.





Tariffs
Quotas
Embargo’s
Non-tariff barries
Types of Commercial Policies
Tariff





Also known as a customs duty
Tax placed on imported/exported products
One of most common tools to control trade.
Used as a source of revenue
Import Tariff



Taxes on imported products
Tariffs help ensure imported products are not sold
for less than domestic products.
Examples of American Tariffs

France refused to join the
USA in its 2003 Iraq
invasion

Bush Administration
proposed 300% import
tax on cheese

Stayed at 100%

Same as oats, chocolates,
cured ham, and other
European edibles
Roquefort cheese
Examples of American Tariffs

Most sold in the USA are
manufactured in America

Why?

126.94% tariff tax on
Chinese manufactured
paperclips
Paper Clips
Example of American Tariffs
Tobacco
350% tariff
Canned Tuna
35% tariff
Non-American Shoe
Companies
48% tax
New Balance is Boston-based
Peanuts
131.8% on shelled
163.8% on unshelled
Brooms
32%
Tires
35% on China
Examples of Tariffs
Where is the most expensive place
to buy an Apple product?

The average Apple device is $1,348 in this
country
German Cars in China

A BMW 650i

Sells for $91,000
in Germany

In China, it sells
326,000
for $_________
Commercial Policies (con’t)
Export tariff – taxes placed on goods
leaving a country & often used as revenue

•
Directly raise a products price
•
Used by countries such as Argentina, Indonesia
& Malaysia for certain agricultural products.
•
US does not use export tariffs.
How an exporter can determine
their product’s tariff in another
country…

http://www.youtub
e.com/watch?v=B
-hz9t6KTFQ

Video clip from
International Trade
Administration’s Free
Trade Administration
(FTA) tariff tool for
exporters
Commercial Policies (con’t)

Import quotas – restrictions on the amount of a
product that can be imported into country.

Protects domestic products by limiting competition

Downside of quotas is that limited competition can
result in increased prices

Example of Import Quota
•
•
•
•
The United States & Sugar
World Price of Sugar is $.05 - $.13/lb
United States it is $.20 - $.24/lb
https://www.youtube.com/watch?v=fGOj8kBpsD4
Quota Example #2

In 1981, Japan voluntarily restricted number of cars
exported to the US.
• Purpose was to give US automakers time to retool for
production of fuel-efficient cars, but they used profits for other
ventures.
• Since there was not a limit on dollar value of exports,
Japanese auto makers then exported larger, more profitable
cars, & used profits to build car plants in US.

List of products/countries with quotas with
Customs Border Patrol

http://www.cbp.gov/trade/quota/guide-import-goods/commodities
Items subject to Quotas
Commercial Policies (con’t)

Embargo - ban of commerce & trade with
another country or group for various reasons.
USA presently has embargos against Cuba,
Iran, Sudan and Syria

•

https://www.youtube.com/watch?v=smS8KTs8rro
1973 oil embargo by Organization of Arab
Petroleum Exporting Countries (OPEC)
•
OPEC refused to sell crude oil to Europe & US
•
Gas prices increased from 38.5¢ to more than 55¢
per gallon
Commercial Policies (con’t)

Boycott - type of embargo used by participants
that believe an organization has done something
morally wrong




Naturewatch has long-standing boycott against
French multinational L’Oreal for continued use of
animal testing for cosmetics
Vegetarians International Voice for Animals (VIVA)
has boycott against German-owned Adidas for
using kangaroo skins in some types of football
boots
http://www.ethicalconsumer.org/LinkClick.aspx?fil
eticket=cOrT55txMvI%3d&tabid=123
Boycott activity…use the above link for file
Commercial Policies

A Boycott is a type of embargo

Usually occur when a county or company is
viewed has doing something morally wrong

http://listverse.com/2011/09/03/10-famous-boycotts/
Examples of Boycotts:
International Buy Nothing Day

Black Friday boycott
of over consumption
in Western
economies


Canada & USA
Other countries it
happens on
Saturday
Abercrombie & Fitch

Abercrombie & Fitch

24 girls boycotted store
in 2005 for their
degrading slogans on
shirts


I had a nightmare I was a
brunette
Who needs brains when
you have these
2002 - 2011
Male Shirts

http://www.pmddtc.state.gov/emb
argoed_countries/index.html

Embargo activity…
•
Assign country, find the effect date
and what the embargo addresses.
Present to class
Commercial Policies (con’t)

Non-tariff barriers –

Barriers based on legislative rules &
regulations related to product.

Example
•
Europe requires GM food products be labeled as
“genetically modified”.
Commercial Policies


Voluntary export restraints - limit the
total amount of products exported
•
China has voluntarily limited total amount of
textiles exported to US.
•
Japan has voluntarily limited total number of
cars exported to US
The United States has chosen to raise prices
versus prepare for competition with these countries
Commercial Policies

Dumping: Occurs when countries sell
products for less than the cost of production
Form of predatory pricing
 Attempt of Big Business to gain market share

• Detrimental to small business

China is most commonly accused of this
practice
• https://www.youtube.com/watch?v=SNf528GzJhI

Anti-Dumping laws exist to guard against
• Tariffs & quotas are implemented
Assignment

Factors of production
review of AK


Be specific
How is resource utilized

Infant Industry in America

Boycott Advertisement
Assignment
Commercial Policies (con’t)

Dumping - when countries export & sell
their products for less than cost of
production.


Ex) Japan & Brazil were accused of
dumping steel in US.
Ex) China was accused of dumping steel
fasteners in EU.
Commercial Policies (con’t)

Predatory pricing - lowering of price to gain
market share. Dumping is type of predatory
pricing.
Ex) Products include steel, textiles, televisions,
computers, hardware and farm crops.


Ex) China has been primary target for anti-dumping
complaints.
International Trade Commission (ITC) – current
investigations of dumping
http://www.usitc.gov/trade_remedy/731_ad_701_
cvd/investigations/active/index.htm#safeguard
Export Support Systems

Export support systems - developed by countries to
encourage exporting

Indirect support activities used by governments to
support sale of exports.
•
•
•
Special trade fairs & trade events. The US Commercial
Service as part of US Department of Commerce, sponsors
events for US businesses.
http://www.export.gov/tradeevents/index.asp
Consulates are government appointed officials from one
country that reside in another country to represent interests of
appointing country’s citizens. http://www.usembassy.gov/
http://www.state.gov/s/cpr/rls/fco/
Export Support Systems
(Con’t)

Export subsidies - payments made by
governments to support export of products



Direct export subsidies lower price of exported
product & can include payments made directly
to exporter by government.
Low interest loans may be offered by
government
Used by US government and European
governments for exported farm products
Export Support Systems
(Con’t)

Indirect export subsidies - support exporting in
roundabout way.






Boeing & Airbus receive help from their governments
in research & development of their planes.
This lowers internal costs to companies helping to
keep prices lower for their planes & to compete
globally
http://www.boeing.com
http://www.airbus.com
http://www.businessweek.com/debateroom/archives/2
007/10/airbus_subsidie.html
http://www.govexec.com/dailyfed/0211/02111nj1.htm
IMH 2.02 Activity

You Tube videos on Airbus & Boeing

http://www.youtube.com/watch?v=zIn0aF6eTRA
http://www.youtube.com/watch?v=7QcUOPDTfTs
http://www.youtube.com/watch?v=Wy_exNIEuM4
Research both companies and the subsidies issue &
provide their viewpoint on this type of indirect export
subsidies. Utilize PPT format








Brief History of Boeing and Airbus
Description of product lines of both
Locations of operations of both
Summary of dispute over indirect export subsidies
Student viewpoint on dispute including for or against
these subsidies – Argue your case
Export Support Systems
(con’t)
http://www.buyusa.gov/
 Home page of US Commercial Service, part of
Dept. of Commerce

http://www.youtube.com/watch?v=JO7SHg25g
po&feature=relmfu
 US Commercial Service – federal export
support video

In Conclusion:
http://www.youtube.com/watch?v=RQj
obBwvcUU
 5 minute clip on Customs Border
Protection trade overview
