MGCR 382 Lecture Notes - Foreign Exchange Market, Import Quota, Guaranteed Rate
Document Summary
Types of government intervention: trade barriers (restrict import), trade promotion (supports export) Most people perceive trade promotion as more positive than trade barriers. But in reality, trade promotion may be more dangerous than trade barriers. Reasons: tb is more visible and easily to be spotted than tp, firms know how to respond to tb. Obj: protect domestic producers and employees against foreign competitors. Custom valuation: difference in the percentage of tariff charged on the same product (e. g. japan car manufacturers" cars or trucks ; different definition: the elbow room) What is the product? (classification) depends on the tariff. (i. e. pez) resolved by the estimation of the value of the different components. Promotional strategies: subsidies (how do you define subsidies) Obvious: cash grants, tax breaks (more complicated), low interest loans, gov"t equity participation. Classic exam question: * gov"t intervention rationale- economic. Balance of trade: disequilibrium; infant industry protection, employment protection. Usa: protectionist (till 1950s)> encouraged other countries to follow her example.