daniels12_07.pptdaniels12_07.pptdaniels12_07.ppt
- 1. 7-1 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Chapter Seven Governmental Influence On Trade International Business Part Three Theories and Institutions: Trade and Investment
- 2. 7-2 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Chapter Objectives • To explain the rationales for governmental policies that enhance and restrict trade • To show the effects of pressure groups on trade policies • To describe the potential and actual effects of governmental intervention on the free flow of trade • To illustrate the major means by which trade is restricted and regulated • To demonstrate the business uncertainties and business opportunities created by governmental trade policies
- 3. 7-3 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Possible impacts of import restrictions designed to create domestic employment • May lead to retaliation by other countries. • Are less likely retaliated against effectively by small economies. • Are less likely to be met with retaliation if implemented by small economies. • May decrease export jobs because of price increases for components. • May decrease export jobs because of lower incomes abroad.
- 4. 7-4 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Protecting “Infant-Industries” • The infant-industry argument for protection holds that governmental prevention of import competition is necessary to help certain industries move from high-cost to low-cost production
- 5. 7-5 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Developing an Industrial Base • Countries seek protection to promote industrialization because that type of production: Brings faster growth than agriculture. Brings in investment funds. Diversifies the economy. Brings more income than primary products do. Reduces imports and promotes exports. Helps the nation-building process.
- 6. 7-6 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Economic Relationships with Other Countries • Trade controls are used to improve economic relations with other countries • Their objectives include improving the balance of: payments raising prices to foreign consumers gaining fair access to foreign markets preventing foreign monopoly prices assuring that domestic consumers get low prices lowering profit margins for foreign producers
- 7. 7-7 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Maintaining essential industries • In protecting essential industries, countries must: Determine which ones are essential. Consider costs and alternatives. Consider political consequences.
- 8. 7-8 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Preventing Shipments to “Unfriendly” Countries • Considerable governmental interference in international trade is motivated by: political rather than economic concerns maintaining domestic supplies of essential goods preventing potential enemies from gaining goods that would help them achieve their objectives
- 9. 7-9 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Maintaining or extending spheres of influence • Governments give aid and credits to, and encourage imports from, countries that join a political alliance or vote a preferred way within international bodies. • A country’s trade restrictions may coerce governments to follow certain political actions or punish companies whose governments do not.
- 10. 7-10 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Preserving 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.
- 11. 7-11 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Instruments of Trade Control • Trade controls that directly affect price and indirectly affect quantity include: tariffs subsidies customs-valuation methods special fees
- 12. 7-12 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Nontariff Barriers: Quantity Controls • Trade controls that directly affect quantity and indirectly affect price include: quotas voluntary export restraint (VERs) “buy local” legislation standards and labels licensing arrangements specific permission requirements administrative delays reciprocal requirements restrictions on services
- 13. 7-13 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Dealing With Governmental Trade Influences • When facing import competition, companies can: Move abroad Seek other market niches Make domestic output competitive Try to get protection