CBM321 E3 Government Policy & International Trade Policy PDF

Topic 7: GOVERNMENT POLICY AND INTERNATIONAL TRADE POLICY Sam Andreus Ytac Group 2 Government policy refers to the strategic plans and decisions made by the state to shape economic, social, and political outcomes. These policies aim to manage a country's...

Topic 7: GOVERNMENT POLICY AND INTERNATIONAL TRADE POLICY Sam Andreus Ytac Group 2 Government policy refers to the strategic plans and decisions made by the state to shape economic, social, and political outcomes. These policies aim to manage a country's resources, control inflation and promote growth.  Government Policy: 1. Fiscal Policy 2. Monetary Policy 3. Regulatory Policy Fiscal Policy Involves the government's use of taxation and public spending to influence the economy. The use of government revenue collection and expenditure to influence a country's economy. Example: Corporate income tax - 25% ASEAN Briefing (2024). Taxation in the Philippines. Personal income tax rate - up to 35% https://www.aseanbriefing.com/news/a-guide-to- taxation-in-the-philippines/ Vat - 12%  Monetary Policy Involves using tools like interest rates and money supply to control inflation and stabilize the currency. Monetary policy is commonly classified as either expansionary or contractionary. Expansionary monetary policy is a policy by monetary authorities to expand the money supply and boost economic activity by keeping interest rates low to encourage borrowing by companies, individuals and banks. Example: tax cuts and increased government spending. Contractionary monetary policy attempts to slow the economy by reducing the money supply and used to combat rising inflation. Example: Central bank increasing the reserve requirement. Regulatory Policy Governments set regulations on industries to ensure public safety, environmental protection, and fair competition. Example: Removing lead from gasoline, minimum wages for workers, and having airbags in all cars International trade policy refers to the rules, regulations, and agreements that govern trade between nations. It aims to create an environment where goods, services, and capital can move across borders efficiently, benefiting all trading partners.  International Trade Policy: 1. Tariff 2. Non-tariff 3. dumping Tariff A tax or duty to be paid on a specific type of imports or exports. It serves as a source of revenue for the government Example: a tax placed on imported or exported goods Non-Tariff Include things like strict regulations and standards, which can limit imports even without direct taxes. Example: licenses, quotas, embargoes, foreign exchange restrictions Dumping the practice of selling products very cheaply in another country in order to prevent that country's companies from competing. Topic 7: GENERAL AGREEMENT ON TARRIFS AND TRADE (GATT) Nikko Catungal  BRIEF BACKGROUND Was an international treaty designed to reduce trade barriers and promote free trade among countries. Established in 1947 and operational until 1995. Primary focus was on reducing tariffs, quotas, and other restrictions that hindered international trade. It was replaced by the World Trade Organization (WTO) in 1995 WHAT ARE TARIFFS, QUOTAS, AND OTHER TRADE RESTRICTIONS? Tariff - is a tax imposed by a government on imported goods and services. Quota - is a limit on the quantity or value of a specific product that can be imported into a country during a particular time period. Subsidies - Governments sometimes provide financial aid to domestic industries to help them compete with foreign imports. Import Licenses - Some countries require businesses to obtain licenses before they can import certain goods, creating bureaucratic barriers to trade. Standards and Regulations - Countries may impose stringent product safety, health, or environmental standards that foreign products must meet, making it harder for those goods to enter the market.  OBJECTIVES Reducing tariffs and trade barriers Non-discrimination Promoting fair competition Encouraging economic development  LIMITATIONS Focus on goods: GATT primarily dealt with trade in goods, leaving out important areas like services, intellectual property, and investment, which became more significant in later decades. Limited enforcement mechanism: GATT had a weak dispute settlement system, making it difficult to enforce rulings when countries violated trade rules. Exclusion of developing countries: Although GATT made some provisions for developing countries, many felt that the rules were still tilted in favor of industrialized nations WORLD TRADE ORGANIZATION Threxie Fuerzas  WORLD TRADE ORGANIZATION was established on January 1, 1995 it embodies the Uruguay Round the successor to GATT 76 governments became members on its first day, it now has 146 members Director-General heads the secretariat of the WTO it has a legal status become the third pillar of the United Nations Organization (UNO)  MINISTERIAL CONFERENCE the highest decision-making body of the WTO it is composed of the representatives of all the Members the WTO executive and is responsible for carrying out the WTO functions meets at least once every two years  GENERAL COUNCIL an executive forum composed of representatives of all the Members it discharges the functions of MC during the intervals between meetings of MC 3 Functional Councils a. Council for Trade in Goods b. Council for Trade in Services c. Council for Trade-Related Aspects of Intellectual Property Rights (TRIPs)  OBJECTIVES OF WT0 1. Promote Economic Growth 2. Sustainable Resource Use 3. Support Developing Countries 4. Reduce Trade Barriers 5. Strengthen Global Trade System 6. Link Trade and Sustainability  FUNCTIONS OF WT0 1. Manage Agreements 2. Handle Plurilateral Agreements 3. Negotiate and Implement 4. Resolve Disputes 5. Coordinate with Other Organizations  GROUP 2 TARIFF TRADE BARRIERS A Brief Overview Juilian Jamica Baron  INTRODUCTION Tariff trade barriers are taxes or duties imposed on imported goods to protect domestic industries and regulate international trade. They help countries protect local businesses from foreign competition. Can imposing tariffs actually help a developing country like the Philippines grow its economy, or do they do more harm than good?  TYPES OF TARIFF BARRIERS Specific Tariff: A fixed fee per unit of imported goods. Ad Valorem Tariff: A percentage of the value of the imported goods. Compound Tariff: A combination of both specific and ad valorem tariffs.  PROS Protects domestic industries. Increases government revenue. Helps domestic businesses compete with foreign imports. CONS Raises prices for consumers. May lead to trade wars. Can lead to inflation if local industries struggle to meet demand. Can imposing tariffs actually help a developing country like the Philippines grow its economy, or do they do more harm than good?  CONCLUSION Tariff trade barriers are important tools for managing international trade but come with benefits and drawbacks. THANK YOU FOR LISTENING AND ACTIVE PARTICIPATION! Non-Tariff Barriers By: Pinque & Diola What Is a Nontariff Barrier? Non-tariff barriers are trade barriers which restrict the import or export of goods in ways other than tariffs. The World Trade Organization (WTO) indicates a variety of non-tariff trade barriers, including as import licensing, pre-shipment inspections, laws of origin, customs delays, and other measures that prevent or restrict trade. What Is a Nontariff Barrier? Developed countries use non-tariff barriers as an economic strategy to limit trade with other nations. When imposing these barriers, governments consider the availability of commodities and services for trade, along with their political relationships with trading partners. What Is a Nontariff Barrier? NTBs arise from different measures taken by governments and authorities in the form of government laws, regulations, policies, conditions, restrictions or specific requirements, and private sector business practices, or prohibitions that protect the domestic industries from foreign competition.  Origin of Non-Tariff Barriers "Introduction of Tariffs Shift from Tariff to Non- Regulation of Trade Through Protecting Industries and Tariff Barriers Non-Tariff Barriers Influencing Trade During the Industrialized Industrialized countries To protect weak formation of nation- countries shifted switched to non-tariff industries impacted states, countries from tariff to non- barriers to regulate by reduced tariffs. introduced tariffs to tariff barriers after international trade without Additionally, they raise funds for local establishing relying on tariffs. This shift provide a way for projects and cover alternative funding exempted certain countries interest groups to recurrent expenses. sources. from additional taxes on influence trade goods while introducing regulation in the other effective trade absence of tariffs. restrictions.  Types of Non-Tariff Barriers 1. Protectionist barriers 2. Assistive policies 3. Non-protectionist policies aim to shield specific domestic protect domestic companies do not directly restrict industries at the expense of without directly restricting imports or exports, but they foreign competition, making it trade but can impede free can result in free trade challenging for other countries trade through measures. limitations. These policies aim to compete with local goods International companies must to protect health, safety, and and services. These barriers meet these requirements to the environment, with can include licensing export or import goods, while examples including licensing, requirements, quotas, governments may provide packaging requirements, antidumping duties, and subsidies and bailouts to help inspections, and import bans import deposits. domestic firms remain on certain fishing methods. competitive.  Examples of Non-Tariff Barriers Licenses Quotas commonly used by countries to regulate the It limits the number of goods that can be traded, importation of goods, allowing authorized thereby narrowing the range of countries with which companies to import specific licensed commodities. firms can conduct business for those commodities. Embargoes Import deposit complete trade bans on specific commodities, Import deposit is a form of foreign trade regulation imposed on imports or exports between particular that requires importers to pay the central bank of countries. the country a specified sum of money for a definite period.  Other Non-Tariff Trade Barriers Instead of placing a quota on the number of goods that can be Local content imported, the government can require that a certain percentage replacement of goods be made domestically. Product standard The importing country imposes a standard for goods. If the standards are not met, the goods are rejected. Domestic Content Governments impose DCR to boost domestic production Requirement Product Labelling Certain countries insist on specific labeling of the products  Other Non-Tariff Trade Barriers Certain nations insist on a particular type of packaging of goods. Packaging requirements Eg. E.U. insists on the packaging with recyclable materials. The importer has to ensure that adequate foreign exchange is Foreign Exchange available for import of goods by obtaining clearance from Regulation exchange control authorities before concluding the contract with the supplier. State Trading Certain items are imported or exported only through canalizing agencies like MMTT (Minerals and metal trading corporation of India) Financial analysis tools Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui of ficia deserunt mollit anim id est laborum.  Presented by Mambering & Tabanao Export Subsidies: Understanding and Implications  Introduction to Export Subsidies Export incentives are a form of economic assistance that governments provide to firms or industries within the national economy in order to help them secure foreign markets. A government providing export incentives often does so in order to keep domestic products competitive in the global sphere. Types of export incentives include export subsidies, direct payments, low- cost loans, tax exemption on profits made from exports, and government- financed international advertising. How does it works? Export incentives make domestic exports competitive by providing a sort of kickback to the exporter. For instance, a government might give an exporter a tax break to help deflate the price of its exported goods. This in turn increases the competitiveness of the product in the global market and ensures that such exports have a wider reach. Generally, this means that domestic consumers might pay more than foreign consumers for the same product..  Purpose of Export Subsidies Enhance Support Domestic Boost Economic Competitiveness Industries Growth Helps industries that Increased exports can By lowering cost for may struggle to lead to higher exporters, these compete without production, more jobs, subsidies can make and greater economic additional support, domestic product activity. particularly in sectors cheaper and more where international attractive in competition is intense. international market. Advantages of Export Subsidies 1.Lower Production Costs 2.Increased Export Activity 3.Boost to Local Economy 4.Economic Significance 5.Market Expansion 6.Employment Opportunities Disadvantage of Export Subsidies 1.Distorts Market Prices 2.Economic Inefficiency 3.Retaliatory Measure 4.Potential for Inflation 5.Increased Prices for Local Consumers 6.Reduced Local Supply 7.Firms Prefer Foreign Markets Export Incentives and the World Trade Organization This level of government involvement can also lead to international disputes that may be settled by the World Trade Organization (WTO). As a broad policy, the WTO prohibits most subsidies, except for those implemented by lesser-developed countries. The idea is that export protections create market inefficiencies, but that developing countries may need to protect certain key industries in order to promote economic growth and prosperity  Conclusion Export Subsidies are a double-edged sword. While they can foster economic growth and development, over-reliance or misuse of these subsidies can instigate trade wars, butcher international relations, and harm the very sectors they intend to support. Dumping By: Echavez & Sobiaco what is dumping? is the practice of selling goods in a foreign market at a price lower than their normal value or production cost. objective: it is done to gain a competitive advantage by undercutting local businesses in the target country.  TYPES OF DUMPING Persistent dumping predatory dumping sporadic dumping It occurs when a country Companies dump excess sells products at a lower is done to gain access to unsold inventories to price in the foreign market the foreign market and avoid price wars in the than the domestic prices. eliminate competition. It home market and There is a consistent creates a monopoly in preserve their demand for the product in the market. competitive position. the international market.  CONSEQUENCES OF DUMPING Short-term gains: long-term gains: 1. Rapid Market Penetration 1. Damaged Brand Reputation Attracts customers quickly by offering Hurts brand value, making it harder to very low prices, boosting sales. sell at normal prices later. 2. Clearing Excess Inventory 2. Regulatory Consequences Helps clear out old stock and make space May lead to fines or restrictions due to for new products. anti-dumping laws. 3. Eliminating Competition 3. Retaliation and Trade Wars Can push competitors out by pricing them Risks trade disputes, which could limit out of the market. access to important markets. what is ANTI- dumping? a measure to rectify the situation arising from the dumping of goods and its distorting effects on domestic producers of similar goods. It provides relief to the domestic industry against the problems caused by dumping. REPUBLIC ACT NO. 8572 otherwise known as the “Anti-Dumping Act of 1999” (the “Act”), provides protection to a Philippine domestic industry which is being materially injured, or is likely to be materially injured by the dumping of articles imported into or sold in the Philippines. what is ANTI- dumping Measures? are trade protection policies implemented by countries to counter the effects of dumping. These measures aim to protect domestic industries from unfair competition and to promote fair trade practices.  INVESTIGATION The government conducts an investigation to determine if foreign products are being sold in the domestic market at prices below their fair market value. INJURY DETERMINATION ANTI-DUMPING If dumping is confirmed, the government assesses whether the domestic industry is being MEASURES harmed or threatened by the dumped imports IMPOSITION OF MEASURES If injury is found, the government can impose anti-dumping measures to counteract the harmful effects of dumping.  what is ANTI- dumping Duties? is a tax imposed on imported goods that are sold at a price below their fair market value. The purpose of the duty is to level the playing field between domestic and foreign producers and to protect domestic industries from unfair competition.  CALCULATION OF ANTI-DUMPING DUTY ANTI-DUMPING DUTY = NORMAL VALUE LESS EXPORT VALUE EXAMPLE: Assume Mr. A from China exports mobile to Mr. B of the U.S. at $1,500 per unit (FOB). However, in China, Mr. A sells the same mobile at $1,800. In this case, Mr. A sells the same item at a lower price in the foreign market. IMPACT ON IMPORTED GOODS AND DOMESTIC INDUSTRIES The imposition of an anti-dumping duty can have a significant impact on both imported goods and domestic industries. It can increase the cost of imported goods, making them less competitive with domestically produced goods. This can benefit domestic industries by increasing their market share and profitability. DIFFERENCE BETWEEN MEASURES AND DUTY ANTI-DUMPING FEATURE ANTI-DUMPING DUTY MEASURES Can include duties, quotas, and SCOPE other measures Specifically a tariff To offset the difference between PURPOSE To protect domestic industries the dumped price and the fair from unfair competition market value Based on the extent of dumping and Based on the difference between the calculation injury to the domestic industry dumped price and the fair market value Can affect both imported goods and Primarily affects imported goods IMPACT domestic industries Topic 8 FOREIGN DIRECT INVESTMENT By: Dojinog & Cañedo  Table of Contents Methods of Foreign Direct Benefits of Foreign Direct Investment (FDI) Investment (FDI) The disadvantage of Foreign Direct Types of Foreign Direct Investment Investment (FDI) (FDI)  What is Foreign Direct Investment (FDI)? Foreign direct investment (FDI) is the type of investment in which foreign investors own assets and control the activities that produce revenue flows in the recipient country Foreign Direct Investment (FDI) is an investment in a company or organization in another country by a group in one country to create an abiding interest.  Methods of Foreign Direct Investment (FDI) There are multiple methods for a domestic investor to acquire voting power in a foreign company. Acquiring voting stock in Joint ventures with a foreign company foreign corporations Mergers and acquisitions Starting a subsidiary of a domestic firm in a foreign country  Benefits of Foreign Direct Investment (FDI) Foreign direct investment offers advantages to both the investor and the foreign host country. These incentives encourage both parties to engage in and allow FDI. Economic stimulation Increase in employment Access to management expertise, skills, and Development of human technology capital  The disadvantage of Foreign Direct Investment (FDI) Despite the numerous advantages, there are two major downsides to FDI, which include: Residents and businesses are physically displaced when they can no Displacement of Local longer pay escalating rents or property taxes, or when their customers Business leave the region, forcing them to relocate or close. Repatriation refers to a company's capacity to return foreign-earned profits or financial assets back to its home country in hard currency (e.g. Profit Repatriation USD, EUR) after paying the host nation's tax responsibilities. Profit repatriation proponents believe that it fosters foreign direct investment. https://corporatefinanceinstitute.com/resources/economics/foreign-direct-investment- Source fdi/?fbclid=IwY2xjawFWJT5leHRuA2FlbQIxMAABHW94aez3Ynu5ntz- ZQSnvIPRsrxyO8qbkAA59iu9IJxjk_ryviYWEx1I4A_aem_CKYFHIV_5sBGkMiZpSGNRg The advent of major corporations, such as Walmart, may displace local enterprises. Walmart is frequently accused of driving out local firms who cannot compete with its reduced prices. The biggest fear with profit repatriation is that corporations will not reinvest their profits in the host country. This causes huge cash outflows from the host country. As a result, several countries have restrictions that restrict foreign direct investment.  Types of Foreign Direct Investment (FDI) 1. Horizontal 2. Vertical FDI is typically a business a business expands classified into 2 expands into a its domestic types: foreign country by operations to a moving to a horizontal and foreign country. different level of vertical FDI. the supply chain.  Types of Foreign Direct Investment (FDI) 1. Conglomerate 2. Platform 2 other types of A company extends FDI have been A company acquires into a foreign observed: country, but the an unconnected firm in a foreign conglomerate output from those country. and platform operations is exported to a third FDI. country. Illustration of a Platform FDI Thank you very much!