Trade Policies PDF

TRADE POLICIES  What is Trade Policy? A trade policy is a government policy that affects the number of goods and services a country exports and imports. It is the set of agreements, regulations, and practices by a government that affect trade with foreign countries. It refer...

TRADE POLICIES  What is Trade Policy? A trade policy is a government policy that affects the number of goods and services a country exports and imports. It is the set of agreements, regulations, and practices by a government that affect trade with foreign countries. It refers to a nation’s formal set of practices, laws, regulations, and agreements that govern international trade practices, or imports and exports to foreign countries. What are Types of Trade Policy? TRADE POLICY: IMPORTS This would keep domestic prices low and stable by increasing the supply available. A trade policy might also restrict imports. For example, if the US steel industry were to suffer from low prices due to foreign steel being more affordable, the government might step in to help them out. TRADE POLICY: EXPORTS Export policy refers to government legislation that dictates how, what, when, and with whom a country exports goods. Export policy defines the tariffs, customs requirements, and limitations on international trade for each country. Free trade A free trade agreement is an agreement between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange. Protectionism is when governments set trade restrictions to help domestic industries. Protectionism refers to government policies that restrict international trade to help domestic industries. Protectionist policies are usually implemented with the goal of improving economic activity within a domestic economy but can also be implemented for safety or quality concerns. Tariff A tariff is a tax in an imported good or service. A specific tariff is a fixed per-unit rate that the importer pays on each item. A tariff is used to restrict imports since it raises the price of foreign goods. Tariffs are used to restrict imports. Simply put, they increase the price of goods and services purchased from another country, making them less attractive to domestic consumers. Import Quota An import quota is a restriction on the amount of a good or service that can be imported in a set time frame. A quota is used to restrict imports by limiting the quantity allowed in. Under an absolute quota, once the limit is reached no more of the good can be imported. Under a tariff-rate quota, once the quota limit is reached, all goods after that are subject to higher tariff rates. A quota is used to restrict imports by limiting the quantity allowed in. Voluntary Export Restraints (VER) A VER is an export quota that restricts the quantity of a good that can be exported to another country. They want to avoid having the importing country set mandatory trade restrictions on the exporting country. A VER is not good for the domestic economy and it is good for the country that is importing the goods. Countries would prefer this voluntary and amiable solution to one that is more inflammatory like a quota or tariff.  How a Trade Policy Works? Trade policy is established when a government sets standards and laws regarding international trade. In some cases, a nation will pursue a more aggressive protectionist policy designed to favor its domestic industries over international competitors. On the other hand, a nation may want to increase international investment and pursue a free trade policy (sometimes called an “open trade policy”) that reduces the barriers to doing business. Many countries establish trade policies between the two extremes, adjusting them as the global economy and domestic political pressures change. PRESENTATION TITLE 20XX 11  Importance of Trade Policy 1. It provides the citizens of a nation with a greater selection of goods. 2. Opens the country up to a larger consumer base where they can sell their goods. 3. Keeps prices more stable and insulates the country from a disaster such as a failed crop. 4. Brings in revenue that the country would not be able to generate without trade. 5. Solid trade policies are what keep all of this trade running smoothly and efficiently.