EECS 1520 Lecture Notes - Lecture 31: Trade Barrier, List Of Auto Parts
21 Jun 2018
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EECS 1520 Lecture 31 Notes
Introduction
Tax Breaks
The government in some countries may allow tax breaks to firms that operate in specific
industries.
Although it need not be a subsidy, this practice is still a form of government financial
support that could benefit firms that export products.
For example, U.S.-based MNCs can benefit from tax breaks when investing in research
and development and also when investing in equipment and machinery.
Country Trade Requirements
A government may require that MNCs complete various forms or obtain licenses before
they can export products to its country.
Such requirements often result in delays simply because the government is inefficient in
validating the forms or licenses.
The process might even be purposely inefficient in order to discourage exporters and
thereby, indirectly, protect jobs within a country.
Bureaucracy (whether international or not) is a strong trade barrier.
Furthermore, it is difficult to prove that a country’s government is purposely trying to
prevent trade and is therefore in violation of free trade agreements.
Even with the available advances in technology (such as the possibility of online forms),
many governments still respond slowly to requests by other country’s exporters to
export products to their country.
Given that some governments are slow, it is possible also those other governments are
purposely slow as a form of retaliation that could hinder trade and so protect local jobs.
Bureaucratic delays discourage some MNCs from pursuing business in other countries.
Government Ownership or Subsidies
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Document Summary
The government in some countries may allow tax breaks to firms that operate in specific industries. Although it need not be a subsidy, this practice is still a form of government financial support that could benefit firms that export products. A government may require that mncs complete various forms or obtain licenses before they can export products to its country. Furthermore, it is difficult to prove that a country"s government is purposely trying to prevent trade and is therefore in violation of free trade agreements. Bureaucratic delays discourage some mncs from pursuing business in other countries. Some governments maintain ownership in firms that are major exporters. The chinese government has granted billions of dollars of subsidies over the years to its auto manufacturers and auto parts suppliers. This practice is still a form of government financial support that could benefit firms that export products.
