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Understanding Trade Policies: Justifications and Challenges in Import Restrictions

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This overview explores the various arguments supporting import restrictions, highlighting reasons such as reducing unemployment, protecting domestic industries, and addressing issues like cheap labor exploitation and political sanctions. Each argument presents specific challenges that countries face in implementing these policies, including potential impacts on national income and balance of payments. Additionally, we examine the forms of tariffs and non-tariff barriers that nations might employ, along with legislative measures like Sections 301 and 201 of the Trade Act that influence trade dynamics.

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Understanding Trade Policies: Justifications and Challenges in Import Restrictions

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  1. Trade Policies Reasons for Import Restrictions 1. Unemployment Argument To reduce unemployment rate. Problems: a. b. c.

  2. 2. Cheap labor Argument To protest against exploitation of foreign workers and violation of human rights (in “sweat shops”). Problems; 1. 2. 3. 4.

  3. Cost 3. Infant Industry Argument To protect ( ) domestic firms since they can’t enjoy ( ). Problem: 4. Industrialization Argument To restructure their agr. oriented economy to mfg. oriented one due to ( ). term of trade = exp. price (agr) imp. price (mfg) Problem: Q'ty

  4. 5. National Income Argument To increase national income by minimizing import (“beggar-thy-neighbor” policy) . Yus = D = C + I + G + ( X - I ) Yuk = D = C + I + G + ( X - I ) Problem: 6. Political Argument (Sanction) To protest/punish unacceptable political behaviors. Problem: 7. Balance of Payment Argument To reduce a large amount of B.O.P or Trade deficit. Problem:

  5. Various forms of Tariff A. Objectives 1. Revenue T. : 2. Protective T. : 3. Progressive T. : 4. Retaliatory T. : 5. Countervailing T. : *(Surcharge) : 6. Punitive T. :

  6. Non-Tariff Barriers (N.T.B.) 1. Government subsidies. 2. Ex. rate manipulation. 3. Problems at customs house. a. b. c. d. 4. Quota (quantity limitation) a. b. 5. Buy local policy a. b. 6. Foreign exchange control a. b. 7. Complicated/burdensome import procedures; a. b. c. d.

  7. Section 301, Trade Act (super 301) This section requires U.S. government to prepare a ( ) that ( ) access of US products to their markets. Section 201, Trade Act (Safeguard provision) When ( ), they may petition for temporary relief such as a quota. The President will make the decision whether to provide relief and the amount of relief (e.g. limitation on the quantity to be imported). Fast-track Authority US congress traditionally extended the privilege and the right to the president to ( ). It was originally designed to speed the reduction of trade barriers and open new markets with other countries.

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