Podcast
Questions and Answers
Why are tariffs and trade barriers used?
Why are tariffs and trade barriers used?
- To reduce government revenue
- To foster growth in developing industries
- To protect domestic employment and industries (correct)
- To increase competition from imported goods
What is a tariff?
What is a tariff?
- A restriction on the amount of goods imported
- A form of tax on imports or exports (correct)
- An incentive for foreign investments
- A subsidy given to domestic industries
What is the purpose of a license in international trade?
What is the purpose of a license in international trade?
- To restrict the amount of goods that can be exported
- To enforce national security measures
- To grant permission to import specific goods (correct)
- To increase tariffs on imported goods
When might countries use tariffs as a retaliation technique?
When might countries use tariffs as a retaliation technique?
Why might a government levy a tariff on certain products?
Why might a government levy a tariff on certain products?
What is a Local Content Requirement?
What is a Local Content Requirement?
What is a Voluntary Export Restraint (VER)?
What is a Voluntary Export Restraint (VER)?
What do technical regulations and standards specify?
What do technical regulations and standards specify?
Which trade barrier often arises from requests to protect domestic industries?
Which trade barrier often arises from requests to protect domestic industries?
Why have tariffs declined in international trade in modern times?
Why have tariffs declined in international trade in modern times?
Study Notes
Trade Barriers
- Trade barriers are associated with the issuance of licenses, and can be in the form of quotas, Voluntary Export Restraints (VER), Local Content Requirements, and Technical Regulations, Standards, and Safety.
Voluntary Export Restraints (VER)
- A VER is a trade barrier where an exporting country voluntarily limits the amount of goods it can export to another country.
- VERs often arise from requests by the importing country to protect its domestic industries.
- Exporting countries may prefer VERs over tariffs or quotas.
- A notable example is Japan's VER on auto exports to the U.S. in the 1980s.
Local Content Requirements
- Instead of placing a quota on the number of goods that can be imported, the government can require that a certain percentage of a good be made domestically.
- The restriction can be a percentage of the good itself, or a percentage of the value of the good.
- Example: a restriction on the importation of computers that 25% of the components used to make the computer are made domestically, or that 15% of the value of the good must come from domestically-produced components.
Technical Regulations, Standards, and Safety
- Technical regulations and standards set out specific characteristics of a product, such as its size, shape, design, functions, and performance, or the way it is labeled or packaged.
Tariffs
- A tariff is a tax levied on imports or exports.
- The money collected under a tariff is called a duty or customs duty.
- The benefits of tariffs are uneven, with the government and domestic industries benefiting from increased revenue and reduced competition.
Reasons for Tariffs and Trade Barriers
- Protecting domestic employment: tariffs can be used to protect domestic industries from imported goods, reducing the possibility of increased competition and higher unemployment.
- Protecting consumers: tariffs can be used to protect consumers from harmful products.
- Infant industries: tariffs can be used to protect infant industries in developing countries.
- National security: tariffs can be used to protect strategically important industries that support national security.
- Retaliation: tariffs can be used as a retaliation technique if a trading partner is not playing by the rules.
Licenses and Import Quotas
- A license is granted to a business by the government, allowing the business to import a certain type of good into the country.
- An import quota is a restriction placed on the amount of a particular good that can be imported.
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Description
Test your knowledge about tariffs, taxes levied on imports or exports. Learn about the reasons why tariffs and trade barriers are used, such as protecting domestic employment and industries. Explore the impact of competition from imported goods on the economy.
