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Questions and Answers
What is one example of a non-tariff barrier?
What is one example of a non-tariff barrier?
Which of the following is not classified as a direct price influence?
Which of the following is not classified as a direct price influence?
What is the main purpose of subsidies in trade control?
What is the main purpose of subsidies in trade control?
Which of the following does not fall under nontariff barriers?
Which of the following does not fall under nontariff barriers?
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Which of the following statements is true regarding tariffs?
Which of the following statements is true regarding tariffs?
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Which of the following is a reason for countries to limit foreign products and services?
Which of the following is a reason for countries to limit foreign products and services?
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What is a non-economic rationale for intervention in trade?
What is a non-economic rationale for intervention in trade?
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Which practice is likely aimed at preserving national heritage?
Which practice is likely aimed at preserving national heritage?
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What was Japan's approach towards rice imports reflective of?
What was Japan's approach towards rice imports reflective of?
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Which of the following is NOT a reason for nations to engage in trade intervention?
Which of the following is NOT a reason for nations to engage in trade intervention?
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What are tariffs primarily used for in international trade?
What are tariffs primarily used for in international trade?
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Which of the following is NOT classified as a non-tariff barrier?
Which of the following is NOT classified as a non-tariff barrier?
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How do non-tariff barriers affect trade?
How do non-tariff barriers affect trade?
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Which of the following is a characteristic of tariffs?
Which of the following is a characteristic of tariffs?
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What type of trade barrier includes administrative delays?
What type of trade barrier includes administrative delays?
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What is one reason for government intervention in trade aimed at fighting unemployment?
What is one reason for government intervention in trade aimed at fighting unemployment?
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Why do governments protect infant industries?
Why do governments protect infant industries?
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What is one economic rationale for promoting industrialization?
What is one economic rationale for promoting industrialization?
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Which of the following is a noneconomic rationale for government intervention in trade?
Which of the following is a noneconomic rationale for government intervention in trade?
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How do governments generally aim to improve their comparative position through trade intervention?
How do governments generally aim to improve their comparative position through trade intervention?
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What is a primary goal of maintaining essential industries?
What is a primary goal of maintaining essential industries?
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What is one effect of increased economies of scale in production?
What is one effect of increased economies of scale in production?
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Which rationale explains why governments promote acceptable practices abroad?
Which rationale explains why governments promote acceptable practices abroad?
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What is one primary economic rationale for government intervention in trade?
What is one primary economic rationale for government intervention in trade?
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Which rationale is associated with improving a country's balance of payments?
Which rationale is associated with improving a country's balance of payments?
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Why might a country promote infant industries through intervention?
Why might a country promote infant industries through intervention?
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What non-economic rationale involves influencing the behavior of other countries?
What non-economic rationale involves influencing the behavior of other countries?
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Which of the following is NOT an economic rationale for trade intervention?
Which of the following is NOT an economic rationale for trade intervention?
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What might be a consequence of government intervention in maintaining essential industries?
What might be a consequence of government intervention in maintaining essential industries?
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Which rationale supports a government using trade policy as a bargaining tool?
Which rationale supports a government using trade policy as a bargaining tool?
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Which of the following considerations is essential for governments when determining essential industries?
Which of the following considerations is essential for governments when determining essential industries?
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What is the primary purpose of trade protectionism?
What is the primary purpose of trade protectionism?
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Which of the following is NOT an economic rationale for government intervention in trade?
Which of the following is NOT an economic rationale for government intervention in trade?
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What challenge might arise when attempting to resolve unemployment through trade policy?
What challenge might arise when attempting to resolve unemployment through trade policy?
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Which of the following is a non-economic rationale for trade intervention?
Which of the following is a non-economic rationale for trade intervention?
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What is a potential consequence of implementing trade protectionism aimed at supporting local industries?
What is a potential consequence of implementing trade protectionism aimed at supporting local industries?
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Why might governments choose to protect infant industries?
Why might governments choose to protect infant industries?
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One effect of high import restrictions could be to:
One effect of high import restrictions could be to:
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What is a major risk of using trade policy to mitigate unemployment?
What is a major risk of using trade policy to mitigate unemployment?
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Study Notes
International Business Policy (IBUS 712) - Trade Protectionism
- Trade protectionism is the use of government restrictions and support to influence international trade competitiveness.
- Protectionism policies affect the ability of foreign producers to compete in a domestic market, and can limit or enhance a company's ability to sell abroad.
Reasons for Government Intervention in Trade
Economic Rationales
- Fighting unemployment: Unemployed people often strongly advocate for trade restrictions on imports.
- Protecting infant industries: Governments may shield nascent industries from competition as they mature, allowing them to become price-competitive. High start-up costs make this protection necessary.
- Promoting industrialization: Countries with rapidly developing manufacturing sectors often use trade restrictions as part of their development strategy. Increasing manufacturing tends to drive GDP.
- Improving comparative position: Nations can employ trade policies to improve their comparative advantage and relationships with other countries. This can involve actions to influence the balance of payments, access to foreign markets, and acting as a bargaining tool.
Noneconomic Rationales
- Maintaining essential industries: Maintaining industries that are critical during times of war or economic crisis is essential to national security and infrastructure.
- Promoting acceptable practices abroad: Governments use trade policy to encourage desirable practices, like human rights standards and environmental protection. This can also be achieved through embargoes or sanctions.
- Maintaining or extending spheres of influence: Trade can be used to support geopolitical influence, to encourage imports from friendly countries, or to discourage imports from opponents.
- Preserving national culture: Governments limit foreign products and services in certain sectors, often to protect their cultural heritage and national pride. This can be done with policies like restrictions on imports of certain goods, or even prohibitions on exporting culturally-significant items.
Instruments of Trade Control
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Two types of controls:
- Tariffs (duties): Directly limit the amount of a good that may be traded by imposing a tax. This is imposed on goods entering, leaving, or passing through a country.
- Non-tariff barriers: Indirectly affect the amount of trade by other methods.
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Non-tariff methods:
- Direct Price Influences: Subsidies, aids, loans, customs valuations.
- Quantity Controls: Quotas, buy-local legislation, standards, labels, specific permission requirements, administrative delays, reciprocal requirements, and embargoes.
- Subsidies: Direct assistance to domestic firms to increase their competitiveness, offsetting market imperfections. Aids are common forms of support, such as agricultural subsidies.
US - China Trade War
The text mentions a trade war between the US and China without providing specific details.
Strategies for Firms Facing Import Competition
- Move abroad: Companies can escape the intense competition by producing products in a different country.
- Seek other market niches: Focus on unique products catering to specific market segments to minimize direct competition.
- Make domestic output competitive: Companies can increase efficiency and lower costs to become more price-competitive with imports.
- Try to get protection: Companies may lobby the government for trade restrictions to minimize the competitive effect of imports.
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Description
Explore the essential concepts of trade protectionism in the context of International Business Policy (IBUS 712). This quiz covers government interventions in trade, economic rationales, and the impact on domestic and foreign markets. Test your understanding of the reasons behind trade restrictions and their implications for global competitiveness.
