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Lecture 5

GMS 400 Lecture 5: GMS400 – Lecture 5

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Ryerson University
Global Management Studies
GMS 400
Dale Carl

GMS400 – Lecture 5 Barriers to Trade and Regional Trading Blocs Barriers to Trade: Tariff Barriers  Tariffs: (often called custom or import duties) – taxes on imported goods, traditionally used to protect local industries  Raises the price of imports  May also be used bilaterally to compensate for export subsidies e.g. against agricultural products from the EU  Most Favored Nation status: by WTO regulation, a country must set tariffs for every country the same as for the best country rate (“most favored nation”) o Does not include the rate within trade blocs or by special bilateral agreements Non-Tariff Barriers  Government laws, regulations, policies or practices that protect domestic companies from foreign competition: o Quotas (particularly on textiles and footwear) o Import license reqts (slow and onerous) o Product standards (lack of harmonization with international standards) o Labeling reqts (e.g. English and French in Canada) o Environmental regulations (packaging in Germany) o Local content reqts; government purchasing policies o Trade wars o Sanctions or embargos Regional Trading Blocs  These are legally recognized by the WTO, and do not affect the most favoured nation tariff requirements.  Common Market: no internal tariffs, free movement of labour and banking, and common tariffs for exports from outside countries (EU).  Customs Union: no internal tariffs, common tariffs for imports from outside the union, but no immigration, capital, or labour agreements (Mercosur).  Free Trade Area: no internal tariffs (in principle), but each member has its own tariff rates for imports from non-members (NAFTA). European Union  See website: or for EU history and common policies toward technical standards, labour regs, taxation, social and monetary regulations  27 members in Europe  Iceland, Norway, Switzerland, and Liechtenstein are not members  Other former Eastern European countries and Turkey will join within 10 years  The European Council (in Brussels, Belgium) us
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