Category:Protectionism
From Eurêka
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Protectionism
Trade barrier General term covering any government limitation on the free international exchange of merchandise or services. These barriers may take the form of tariffs, quotas, import deposits, restrictions on the issue of import licenses or stringent regulations relating to health or safety standards.
Protectionism Adoption by government of special measures to secure advantages for home-produced goods over imports, normally by imposing tariffs and quotas.
Embargo Government edict prohibiting citizens from trading with another country or countries.
Trade license Trade control device whereby a government grants permission to certain private individuals and companies to engage in importing or exporting commodities and regulates their activities by the conditions of the license.
Dumping Strictly, the sale of a commodity on a foreign market at a price below marginal cost. An exporting country may support the short-run losses of this policy in order to eliminate competition and thereby gain market share in the foreign market. Alternatively, it may dump in order to dispose of temporary surpluses in order to avoid a reduction in home prices and therefore producers’ incomes.
- Predatory dumping Dumping occurring when the firm discriminates in favor of some foreign buyers temporarily with the purpose of eliminating some competition and later raising its prices after the competition is dead.
- Persistent dumping Predatory dumping that goes in indefinitely.
Anti-dumping measure Regulation instituted by government to discourage the importation of cheap goods that undercut the products manufactured by the home country.
Countertrade Umbrella term for several sorts of trade which involve the exchange of goods rather than the purchaser paying in money. Form of barter in which the buyer requires the seller to accept goods (of the buyer’s choosing) in lieu of currency. The seller has the task of marketing the goods. Another form of countertrade is the agreement by the seller of plant and machinery to “buy back” the products produced by the plant and machinery in settlement of debt. Countertrade was developed by Communist Bloc countries because of their lack of hard currency, later the practice was extended to Third World countries overburdened by overseas debt.
- Counterpurchase Most common type of countertrade, in which exporters agree to purchase a set amount of goods from a country whenever the country buys from them.
Tariffs
Tariffs Duties or taxes imposed on imports. Tariffs are generally applied for the purpose of carrying out a particular economic policy, and in this context may be used to serve many functions:
(1) To reduce overall level of imports by making them more expensive relative to home-produced substitutes, with the aim of eliminating a balance-of-payments deficit.
(2) To counter the practice of dumping by raising the import price of the dumped commodity to its economic level.
(3) To retaliate against restrictive measure imposed by other countries, i.e. reciprocity.
(4) To protect a new industry until it is sufficiently well established to compete with the more developed industries of other countries, such as infant industries argument.
(5) To protect “key” industries, such as agriculture, without which the economy would be vulnerable in time of war - the national security argument.
- Customs drawback
- Preferential tariff
- Tariff agreement
- Tariff exemption
- Tariff reduction
Tariff binding Commitment not to increase a rate of duty beyond an agreed level. Once a rate of duty is bound, it may not be raised without compensating the affected parties.
Tariff escalation Higher import duties on semi-processed products than on raw materials, and higher still on finished products. This practice protects domestic processing industries and discourages the development of processing activity in the countries where raw materials originate.
Tariff peaks Relatively high tariffs, usually on “sensitive” products, amidst generally low tariff levels. For industrialized countries, tariffs of 15% and above are generally recognized as “tariff peaks.”
Tariffication Procedures relating to the agricultural market-access provision in which all non-tariff measures are converted into tariffs.
Tariff rate quota Combination of an import tariff and an import quota in which imports below a specified quantity enter at a low (or zero) tariff and imports above that quantity enter at a higher tariff. Also called a tariff quota.
Infant industry concept Imposition of tariffs to encourage domestic production.
- Infant industry argument Argument in support of the retention of a protective import tariff. An industry does not operate at an optimum least-cost output until it has reached a sufficient size to obtain significant economies of scale. A new industry, therefore, in, say, a developing country, will always be in a competitively vulnerable position vis-a-vis an established industry in an advanced country. It follows that the stage of growth at which the industry (or country) can take-off industrially will be postponed indefinitely. The argument concludes that protection is necessary until the industry has reached its optimum size.
Harmonizing formula Used in tariff negotiations for much steeper reductions in higher tariffs than in lower tariffs, the final rates being “harmonized” i.e. closer together.
Schedule of concessions List of bound tariff rates.
(alphabetical listing)
Ad valorem tariff Tariff rate charged as percentage of the price.
Binding (Bound tariffs) To set a maximum customs duty or tariff. Through GATT/WTO negotiations, tariffs on trade in certain goods are bound. The bound tariff level is not necessarily the actual tariff imposed. Countries, particularly developing countries, often have bound tariffs considerably higher than those imposed.
Nuisance tariff Tariff so low that it costs the government more to collect it than the revenue it generates. Sometimes, a tariff that does not have any protective effect — some countries defend this as necessary in order to raise revenues.
Import Barriers
Non-economic import barriers Barriers to free trade are widespread including many that have no economic basis such as national security, national pride, income redistribution, etc.
Non-tariff measures (Non-tariff import barriers) Quotas, import licensing, health and safety regulations.
- Administrative barriers
- Excise and other taxes Such as VAT.
- Stringent health or safety standards
- Technical standards and regulations
- Unfair labeling regulations
Quota (Import quota) Quantitative limits placed on the importation of specified commodities.
Local content Restriction applied to foreign goods assembled in a host country. The degree of local content is measured as a percentage of the total product. In the case of the European Community, it is defined as to be of Community origin if it has a local content of 60%.
Countervailing duty Special assessment levied on imports to offset an advantage or discount provided by a foreign seller or government, used to prevent dumping.
Import deposit Method of import restrictions requiring importers to deposit a percentage of the value of their imports for a set time before being repaid.
Voluntary restraint agreement Agreement to limit the supply of goods to a market. Used in the US to limit steel imports in 1984 to protect their own industry. Imports were restricted to 25% of domestic use.
Orderly marketing agreement
Safeguard agreement (Safeguard exception) Minor loophole in global trading rules, allowing a country to head off a sudden wave of imports without having to wait for the slow, cumbersome trade dispute resolution process to do its work. Came into effect 1995. Used by US to limit steel imports 5 March 2002.
Export Barriers
Export barriers (Export controls) Government restrictions on the sales of certain materials, commodities, products, or weapons in foreign trade.
- Battle Act (Mutual Defense Assistance Control Act) Legislation prohibiting trade in strategic materials with “any nation threatening the security of the US,” 1951.
- Export Administration Act Export controls extended over the export of strategic goods and technology having both civil and military uses, 1979.
Export subsidies Subsidizing the manufacture of goods exported.
- Export sales subsidies US tax law loophole that allows companies, such as Boeing, Microsoft, Exxon Mobile, Ford and General Motors, to avoid paying taxes on some overseas sales by channeling them through offshore subsidiaries set up in the Virgin Islands, Barbados and Guam. The US does not tax sales made by those subsidiaries, nor does it when they transfer their profits to their parent companies. WTO ruled against the US for this practice as violating international trade rules, 24 February 2000.
- Foreign sales corporation program US tax subsidy for major firms to avoid tax on overseas sales. After the WTO ruling, Congress revised the law in an effort to bring it into line with the trade group’s rules, but the EU found the new version was worse because it expanded eligibility.
Trade Conflict
Embargo Government edict prohibiting citizens from trading with another country or countries.
Retaliation Imposition of tariffs as a sanction against another country’s tariffs.
Trade conflict Tension between countries in economic matters, below that of active trade war.
- US v Europe Economic tension that embraced beef, banana war, genetically modified products, aircraft noise, export trade subsidies and the use of individual’s information gathered on the Internet.
Trade Wars Multiple retaliation when one country places impediments on trade to be countered by similar restraints by others.
- Banana war Trade conflict with Europe over the sale of bananas for which the Caribbean countries were given preference. US retaliated with punishing tariffs on European exports, March 1991, settled with a rundown in quotas until 2006, 11 April 2001.
Dispute Settlement Body Organization that adjudicates failure to respect trade obligations.
