International Business

Discuss the relationship between government intervention and protectionism.

* GI in trade and investment to achieve political, social, or economic objectives.

Government intervention alters (change) the competitive landscape, by hindering or helping the ability of firms to compete internationally.

Government intervention is an important dimension of country risk

* GI include:

a: Protectionism — national economic policies that restrict free trade. Usually intended to raise revenue or protect domestic industries from foreign competition.

Consequence of protectionism

* Reduced supply of goods to buyers

* Price inflation

* Reduced variety, fewer choices available to buyers

* Reduced industrial competitiveness

* Various adverse unintended consequences (e.g., while the home country dithers, other countries can race ahead)

b: Customs — the checkpoint at national ports of entry where officials inspect imported goods and levy tariffs

What is the different between tariffs, non-tariffs trade barriers, investment barriers and government subsidies?

* Instruments (tool):

Tariffs (on imports: citrus, textiles), non tariffs trade barriers (government policy regulation), quota (limit the number of imports production: Japanese cars imports), investment barriers (law or rules to hinder foreign direct investment: mexico’s restrictions in its oil industry)

* Tariff and widespread：Harmonised code – standardised worldwide system that determines tariff amount. In developing economies, tariffs are common. In advanced economies, tariffs still provide significant revenue.

However tariffs declining：Governments have reduced tariffs over time, mainly via the General Agreement on Tariffs and Trade (GATT), which became the World Trade Organization (WTO). Economic integration also leads to lower tariffs, but only within economic blocs. e.g., under NAFTA, Mexico eliminated nearly all tariffs on imports from the U.S., but maintains tariffs with the...