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MGCR 382 (143)
John Saba (33)
Lecture 11

Lecture 11

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Management Core
MGCR 382
John Saba

International Business Lecture 11Next classWe will finish chapter 10 p268301 thFinal ExamTuesday April 12 6 to 9pm Exam covers all chapters except 18 1 2 3 6 7 8 9 10Note that only multiple choice questions will be asked on chapter 7 p180211 and chapter 8 page 212239 in the final exam as we did not cover them in classMajor questions and essay questions address subjects covered after midterm ie chapters 6 9 and 10Chapter 9Formulation of National Trade Policies contObjective 6Explain how countries protect themselves against unfair trade practices A The process When governments feel that domestic exporters have received unfair treatment in other countries they may take retaliatory measures thus many countries have adopted laws protecting their domestic business firms from unfair trade practices US mechanism for retaliationStep 1 InvestigationThe International Trade Administration ITA a division of the US department of commerce initially investigates complaints from the firms affected by alleged unfair trade practicesIt determines whether an unfair trade practice has occurred If the ITA transfers confirmed cases to the International Trade Commission ITC an independent US government agencyStep 2 DeterminationThe International Trade Commission ITCs 6 commissioners will decide whether US producers have suffered material injury If yes the ITC will impose duties on the offending imports to counteract the unfair trade practiceCanada mechanism for retaliationA similar process is followed by the Canadian International Trade tribunal This is an independent quasijudicial administrative tribunal that reports to parliament via the minister of finance Canadas International Trade Tribunal like the US ITC and other similar government agencies worldwide focuses on2 types of unfair trade practices Government subsidies that distort trade Unfair pricing practicesWe now study counteracting measuresB Countervailing dutiesimposed against government subsidiesMost countries protect local firms from foreign competitors that benefit from unfair trade practices of their home governments using 2 toolscountervailing dutiesA countervailing duty CVD is an ad valorem tariff on an imported good that is imposed by the importing country to countervail the effect of foreign subsidies The CVD is calculated to just offset the subsidy advantage of the foreign firm in the exporting country It increases the price of an imported good by an amount equal to another countrys export subsidies Countervailing duty seeks to level the playing field between domestic firms not receiving a subsidy and foreign firms that toEx It is often granted to a domestic industry that has been hurt by a foreign country subsidizing its firms Ex Kia subsidized by South Korea original car price is 22000 minus South Koreas subsidy so new export price is 20000 Canadian government impose countervailing duty of 2000 so the selling price is back to 22000Problem with countervailing duty is finding an agreed definition of what constitutes a subsidyRead USEU agriculture subsidies example in textbook p262 C Antidumping regulations and dutiesimposed against unfair pricing practices Many countries are also concerned about their domestic firms being victimized by discriminatory or predatory pricing practices of foreign firms such as dumpingAntidumping is a duty tax charged on imported goods It is designed to protect local industries from goods that have been dumped ie priced below the normal market prices or cost by foreign producers into the local market Effects of antidumping regulations and or dutiesThey protect local firmsindustries from dumping by foreign firms They reduce or eliminate the competitive advantage given to imported products priced at abnormally low levels What is dumpingDefinition According to the WTO dumping occurs such that antidumping duties may be imposed when 2 requirements are satisfiedStep 1 One of the following 2 situations occurs
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