AFM333 Lecture Notes - Lecture 10: Trade Barrier, Country Risk, Protectionism

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM333
• Professor: Darcy Delamare

Document Summary

> government impose defensive barriers to safeguard industries, workers, and special interest groups and to promote national security. >governments impose offensive barriers to pursue strategic or public policy objectives, such as increasing employment or generating tax revenues. Consequences of government intervention: reduced supply of goods to buyers, reduced variety -> fewer choices available to buyers, reduced industrial competitiveness, various adverse unintended consequences -> while the home country dithers, other countries can race ahead. A policy of restricting imports in order to protect home-country firms: export- led development, encourages development of export-intensive industries, proved very successful and led to rapid economic growth and high living standard. Evolution of government intervention: a century ago, trade barriers were high, trading environment worsened through two world wars & great depression. In 1983, the us passed the smooth-hawley tariff act, which raised us tariffs more than 50: us government began to reduce tariffs.