Question 1

Stakeholders Affecting Government Policies

Accepted Answer

All countries try to influence trade.
To achieve economic, social, & political objectives.
Often there are conflicting interests.
There are various Interest Groups (specific industries, consumers, political groups).
Try to balance various interest gro

Question 2

Why Governments Intervene in Trade

Accepted Answer

Economic Rationales: preventing unemployment, protecting infant industries, industrialization, comparative position

Noneconomic Rationales: essential industries, unfriendly countries, spheres of influence, national identity

Question 3

Economics: Preventing Unemployment

Accepted Answer

By restricting imports, helps promote domestic production and thus improve employment (BUT... retaliation, higher prices)

Question 4

Economics: Protecting Infant-Industries

Accepted Answer

The infant industry argument for protection holds that gov prevention of import competition is necessary to help certain industries move from high-cost to low-cost production (BUT...is it fair?)

Question 5

Economics: Promoting Industrialization

Accepted Answer

Countries seek protection to promote industrialization b/c of belief that industrialization...brings faster growth, employment, investment funds, diversifies, stable, higher income, nation-building

Question 6

Economics: Improve Comparative Position

Accepted Answer

Trade controls are used to improve performance relative to other countries such as...balance of payments, fair access to foreign mkts, bargaining tool, prices, prevent monopoly, avoid dumping

Question 7

Non-Economic: Maintaining Essential Industries

Accepted Answer

Protect industries considered essential or critical to the country's protection and prosperity (BUT...you must determine which are essential (Food, Defense, Utility), Consider costs vs alternatives, consider political consequences).

Question 8

Non-Economic: "Unfriendly" Countries

Accepted Answer

Trade controls are used to prevent enemies of potential enemies from getting strategic goods, like computer or nuclear technology.

Motive is political. Could retaliate. Has economic costs.

Question 9

Non-Economic: Spheres of Influence

Accepted Answer

Governments give aid, credits, and imports encouragement to countries that support their geo-political objectives.

A country's trade restrictions may coerce governments to follow certain political actions or punish companies whose gov does not

Question 10

Non-Economic: Preserve National Identity

Accepted Answer

To sustain this collective identity that sets their citizens apart from those in other nations, countries limit foreign products and services in certain sectors. (movies?)

Question 11

Methods of Trade Interventions

Accepted Answer

Governments use 2 main methods of intervention:

1. Tariff Barriers: affects price

2. Non-Tariff Barriers: affects price and quantity

Question 12

Tariff Based Intervention

Accepted Answer

Types of Tariff:

-Import: charged at import
-Transit: charged as goods pass through a country
-Export: charged at export

Significant revenue source for developing countries

Question 13

Non-Tariff Based Intervention: Direct Price Influences

Accepted Answer

The main non-tariff barriers that affect price are:

Subsidies: farm subsidies for sugar in U.S.

Aid and Loans

Customs Valuation

Other: prepay, service fees, licenses

Question 14

Non-Tariff Based Intervention: Quality Controls

Accepted Answer

Trade controls that directly affect quantity (and indirectly affect price) include:
-Quotas
-Voluntary export restraint
-"Buy local" legislation
-Standards and label
-Specific permission requirement
-Admin delays
-Restrict services

Question 15

Dealing with Governmental Trade Influences

Accepted Answer

When facing import competition, companies can:
-move abroad
-seek other markets
-become stronger
-influence gov for protection
but not all companies want protection (more global ones want free trade)

MGMT 350 Chapter 7

Governmental Influence on Trade

Question	Answer
Stakeholders Affecting Government Policies	All countries try to influence trade. To achieve economic, social, & political objectives. Often there are conflicting interests. There are various Interest Groups (specific industries, consumers, political groups). Try to balance various interest gro
Why Governments Intervene in Trade	Economic Rationales: preventing unemployment, protecting infant industries, industrialization, comparative position Noneconomic Rationales: essential industries, unfriendly countries, spheres of influence, national identity
Economics: Preventing Unemployment	By restricting imports, helps promote domestic production and thus improve employment (BUT... retaliation, higher prices)
Economics: Protecting Infant-Industries	The infant industry argument for protection holds that gov prevention of import competition is necessary to help certain industries move from high-cost to low-cost production (BUT...is it fair?)
Economics: Promoting Industrialization	Countries seek protection to promote industrialization b/c of belief that industrialization...brings faster growth, employment, investment funds, diversifies, stable, higher income, nation-building
Economics: Improve Comparative Position	Trade controls are used to improve performance relative to other countries such as...balance of payments, fair access to foreign mkts, bargaining tool, prices, prevent monopoly, avoid dumping
Non-Economic: Maintaining Essential Industries	Protect industries considered essential or critical to the country's protection and prosperity (BUT...you must determine which are essential (Food, Defense, Utility), Consider costs vs alternatives, consider political consequences).
Non-Economic: "Unfriendly" Countries	Trade controls are used to prevent enemies of potential enemies from getting strategic goods, like computer or nuclear technology. Motive is political. Could retaliate. Has economic costs.
Non-Economic: Spheres of Influence	Governments give aid, credits, and imports encouragement to countries that support their geo-political objectives. A country's trade restrictions may coerce governments to follow certain political actions or punish companies whose gov does not
Non-Economic: Preserve National Identity	To sustain this collective identity that sets their citizens apart from those in other nations, countries limit foreign products and services in certain sectors. (movies?)
Methods of Trade Interventions	Governments use 2 main methods of intervention: 1. Tariff Barriers: affects price 2. Non-Tariff Barriers: affects price and quantity
Tariff Based Intervention	Types of Tariff: -Import: charged at import -Transit: charged as goods pass through a country -Export: charged at export Significant revenue source for developing countries
Non-Tariff Based Intervention: Direct Price Influences	The main non-tariff barriers that affect price are: Subsidies: farm subsidies for sugar in U.S. Aid and Loans Customs Valuation Other: prepay, service fees, licenses
Non-Tariff Based Intervention: Quality Controls	Trade controls that directly affect quantity (and indirectly affect price) include: -Quotas -Voluntary export restraint -"Buy local" legislation -Standards and label -Specific permission requirement -Admin delays -Restrict services
Dealing with Governmental Trade Influences	When facing import competition, companies can: -move abroad -seek other markets -become stronger -influence gov for protection but not all companies want protection (more global ones want free trade)

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