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2.02 Exemplify how and why nations develop trade barriers and support export activities

This article discusses the reasons behind the development of trade barriers and support for export activities by nations, with a specific focus on concerns related to trading with China. It explores topics such as job loss, protection of domestic products, currency manipulation, and the impact on American companies. Additionally, it covers the different types of commercial policies, such as tariffs and quotas, that countries use to control international trade.

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2.02 Exemplify how and why nations develop trade barriers and support export activities

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  1. 2.02 Exemplify how and why nations develop trade barriers and support export activities

  2. 2.02 • Why do some Americans worry about trading with China? • American jobs are lost • China protects domestic products • Difficult for the United States to sell to China • Apple, Facebook, Yahoo!, Cisco, Google, & Microsoft have all been targets of Chinese government • Manipulate currency rates • China prints more of its money & buys US dollars with it • This increases the supply of its currency (Yuan) • Keeps exports cheap but allows them to stockpile US dollars which in time creates issues

  3. 2.01 • Practice Quiz available online via Edmodo • Everyone needs to take it by Friday • Key terms • Absolute advantage • Comparative Advantage • Opportunity cost • Commodity • Factors of production • Natural, Human, & Capital

  4. Agenda • 15 minutes to finalize paper and submit via Edmodo • If done take the practice quiz for 2.01 • 2.02 notes & activity

  5. Current Events • Workplace Concerns • https://www.youtube.com/watch?v=-FfIf24SET8 • Do you think that employer’s should monitor social media sites of employees?

  6. Why limit international trade? • Trade barriers – • Government placed restrictions on trade • Three main reasons to implement trade barriers: • Infant industry argument - based on idea that a developing/emerging industry needs time to become globally competitive • Allows new companies a chance to compete without the threat of International competition • Once it becomes substantial; barriers are reduced

  7. Why limit international trade? (con’t) • National security argument - based on idea that a country does not want to become dependent upon other countries for products • Japan taxes the import of rice to protect domestic farmers • Land in Japan could be used for other things; however, Japan would be reliant on other countries for its main food source

  8. Why limit international trade? (con’t) • Free trade favors rich countries argument – based on idea that large, developed countries have comparative advantages in many areas. • Canadians wary of US dominating their media market. • France has worked to protect its TV and film industry from US domination

  9. Review • Main reasons trade barriers are implemented: • Protect select industries, interests, & culture of country • Prevent rich countries from being too influential

  10. Commercial Policies • When conducting business in another country you have to know the rules and regulations you will encounter • Know American policies plus countries you choose to do business with • Commercial policies - regulations & restrictions countries use to control international trade. • Tariffs • Quotas • Embargo’s • Non-tariff barries

  11. Types of Commercial Policies • Tariff • Also known as a customs duty • Tax placed on imported/exported products • One of most common tools to control trade. • Used as a source of revenue • Import Tariff • Taxes on imported products • Tariffs help ensure imported products are not sold for less than domestic products.

  12. Examples of American Tariffs Roquefort cheese • France refused to join the USA in its 2003 Iraq invasion • Bush Administration proposed 300% import tax on cheese • Stayed at 100% • Same as oats, chocolates, cured ham, and other European edibles

  13. Examples of American Tariffs Paper Clips • Most sold in the USA are manufactured in America • Why? • 126.94% tariff tax on Chinese manufactured paperclips

  14. Example of American Tariffs Tobacco 350% tariff Canned Tuna 35% tariff

  15. Non-American Shoe Companies 48% tax New Balance is Boston-based Peanuts 131.8% on shelled 163.8% on unshelled

  16. Brooms 32% Tires 35% on China

  17. Examples of Tariffs Where is the most expensive place to buy an Apple product? • The average Apple device is $1,348 in this country Brazil

  18. German Cars in China • A BMW 650i • Sells for $91,000 in Germany • In China, it sells for $_________ 326,000

  19. Commercial Policies (con’t) • Export tariff – taxes placed on goods leaving a country & often used as revenue • Directly raise a products price • Used by countries such as Argentina, Indonesia & Malaysia for certain agricultural products. • US does not use export tariffs.

  20. How an exporter can determine their product’s tariff in another country… • http://www.youtube.com/watch?v=B-hz9t6KTFQ • Video clip from International Trade Administration’s Free Trade Administration (FTA) tariff tool for exporters

  21. Commercial Policies (con’t) • Import quotas – restrictions on the amount of a product that can be imported into country. • Protects domestic products by limiting competition • Downside of quotas is that limited competition can result in increased prices • Example of Import Quota • The United States & Sugar • World Price of Sugar is $.05 - $.13/lb • United States it is $.20 - $.24/lb • https://www.youtube.com/watch?v=fGOj8kBpsD4

  22. Quota Example #2 • In 1981, Japan voluntarily restricted number of cars exported to the US. • Purpose was to give US automakers time to retool for production of fuel-efficient cars, but they used profits for other ventures. • Since there was not a limit on dollar value of exports, Japanese auto makers then exported larger, more profitable cars, & used profits to build car plants in US. • List of products/countries with quotas with Customs Border Patrol • http://www.cbp.gov/trade/quota/guide-import-goods/commodities

  23. Items subject to Quotas

  24. Commercial Policies (con’t) • Embargo - ban of commerce & trade with another country or group for various reasons. • USA presently has embargos against Cuba, Iran, Sudan and Syria • https://www.youtube.com/watch?v=smS8KTs8rro • 1973 oil embargo by Organization of Arab Petroleum Exporting Countries (OPEC) • OPEC refused to sell crude oil to Europe & US • Gas prices increased from 38.5¢ to more than 55¢ per gallon

  25. Commercial Policies (con’t) • Boycott - type of embargo used by participants that believe an organization has done something morally wrong • Naturewatch has long-standing boycott against French multinational L’Oreal for continued use of animal testing for cosmetics • Vegetarians International Voice for Animals (VIVA) has boycott against German-owned Adidas for using kangaroo skins in some types of football boots • http://www.ethicalconsumer.org/LinkClick.aspx?fileticket=cOrT55txMvI%3d&tabid=123 • Boycott activity…use the above link for file

  26. Commercial Policies • A Boycott is a type of embargo • Usually occur when a county or company is viewed has doing something morally wrong • http://listverse.com/2011/09/03/10-famous-boycotts/

  27. Examples of Boycotts:International Buy Nothing Day • Black Friday boycott of over consumption in Western economies • Canada & USA • Other countries it happens on Saturday

  28. Abercrombie & Fitch • Abercrombie & Fitch • 24 girls boycotted store in 2005 for their degrading slogans on shirts • I had a nightmare I was a brunette • Who needs brains when you have these

  29. 2002 - 2011

  30. Male Shirts

  31. http://www.pmddtc.state.gov/embargoed_countries/index.html • Embargo activity… • Assign country, find the effect date and what the embargo addresses. Present to class

  32. Commercial Policies (con’t) • Non-tariff barriers – • Barriers based on legislative rules & regulations related to product. • Example • Europe requires GM food products be labeled as “genetically modified”.

  33. Commercial Policies • Voluntary export restraints - limit the total amount of products exported • China has voluntarily limited total amount of textiles exported to US. • Japan has voluntarily limited total number of cars exported to US • The United States has chosen to raise prices versus prepare for competition with these countries

  34. Commercial Policies • Dumping: Occurs when countries sell products for less than the cost of production • Form of predatory pricing • Attempt of Big Business to gain market share • Detrimental to small business • China is most commonly accused of this practice • https://www.youtube.com/watch?v=SNf528GzJhI • Anti-Dumping laws exist to guard against • Tariffs & quotas are implemented

  35. Assignment • Factors of production review of AK • Be specific • How is resource utilized • Infant Industry in America • Boycott Advertisement Assignment

  36. Commercial Policies (con’t) • Dumping - when countries export & sell their products for less than cost of production. • Ex) Japan & Brazil were accused of dumping steel in US. • Ex) China was accused of dumping steel fasteners in EU.

  37. Commercial Policies (con’t) • Predatory pricing - lowering of price to gain market share. Dumping is type of predatory pricing. Ex) Products include steel, textiles, televisions, computers, hardware and farm crops. • Ex) China has been primary target for anti-dumping complaints. • International Trade Commission (ITC) – current investigations of dumping http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/active/index.htm#safeguard

  38. Export Support Systems • Export support systems - developed by countries to encourage exporting • Indirect support activities used by governments to support sale of exports. • Special trade fairs & trade events. The US Commercial Service as part of US Department of Commerce, sponsors events for US businesses. http://www.export.gov/tradeevents/index.asp • Consulates are government appointed officials from one country that reside in another country to represent interests of appointing country’s citizens.http://www.usembassy.gov/ • http://www.state.gov/s/cpr/rls/fco/

  39. Export Support Systems (Con’t) • Export subsidies - payments made by governments to support export of products • Direct export subsidies lower price of exported product & can include payments made directly to exporter by government. • Low interest loans may be offered by government • Used by US government and European governments for exported farm products

  40. Export Support Systems (Con’t) • Indirect export subsidies - support exporting in roundabout way. • Boeing & Airbus receive help from their governments in research & development of their planes. • This lowers internal costs to companies helping to keep prices lower for their planes & to compete globally • http://www.boeing.com • http://www.airbus.com • http://www.businessweek.com/debateroom/archives/2007/10/airbus_subsidie.html • http://www.govexec.com/dailyfed/0211/02111nj1.htm

  41. IMH 2.02 Activity • You Tube videos on Airbus & Boeing • http://www.youtube.com/watch?v=zIn0aF6eTRA • http://www.youtube.com/watch?v=7QcUOPDTfTs • http://www.youtube.com/watch?v=Wy_exNIEuM4 • Research both companies and the subsidies issue & provide their viewpoint on this type of indirect export subsidies. Utilize PPT format • Brief History of Boeing and Airbus • Description of product lines of both • Locations of operations of both • Summary of dispute over indirect export subsidies • Student viewpoint on dispute including for or against these subsidies – Argue your case

  42. Export Support Systems (con’t) • http://www.buyusa.gov/ • Home page of US Commercial Service, part of Dept. of Commerce • http://www.youtube.com/watch?v=JO7SHg25gpo&feature=relmfu • US Commercial Service – federal export support video

  43. In Conclusion: • http://www.youtube.com/watch?v=RQjobBwvcUU • 5 minute clip on Customs Border Protection trade overview

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