Chapter 3 Trade and Investment Policies

1
Chapter 3Trade and Investment Policies
2
Rationale and Goals of Trade

• National sovereignty
• Provides a government with the right to determine
  national policies
• Government policies
• Largely domestic in nature
• Foreign policies
• Designed to pursue the interests of its citizens
• Internal security (through external alliances),
  security of its citizens abroad, control
  transfers
• Policies vary conflicts possible

3
Transfers

• Capital
• Financial flows for transactions investments
• Goods
• Raw materials, components, finished goods
• Know-how
• Technological, legal rights
• People
• employees carrying out business activities,
  tourists
• Services

4
Bretton Woods Conference

• 1944, after the conclusion of WWII
• economic recovery
• Aim Open markets
• lower barriers to trade, movement of capital
• system to govern above
• Proposed 3 international bodies
• IMF, WB, ITO
• International Trade Organization (ITO)
• From 1945, culminated in 1948, Havana Charter, 53
  countries
• Grandiose designs, but nations failed to ratify

5
General Agreement on Tariffs Trade (GATT)

• 1947
• to reduce barriers to international trade, until
  the ITO came into force
• continued to operate for almost five decades as a
  de facto international organization.
• Most-Favored Nation clause
• Not special, but equal treatment (Normal Trade
  Status)
• Exceptions trading blocs, manufactured products
  from developing world
• Achieved substantial progress, in spite of
  lacking enforcement mechanisms
• 8 rounds

6
World Trade Organization (WTO)

• Successor to GATT
• January 1, 1995
• administers international trade investments
• headquartered in Geneva, Switzerland
• Doha round from November 2001
• make globalization more inclusive and help the
  world's poor, by slashing barriers and subsidies
  in farming
• GATS 1995, AoA

7
150 countries of the WTO
8
Forms of Trade Control

• Tariff
• Tax based either on
• Value of import (primarily)
• Amount if import
• Combination
• Non-tariff
• Quotas

9
Tariffs

• Aim
• to protect domestic industry from foreign
  competition
• to raise fiscal revenue
• to relieve BOP position
• Tax based either on
• Ad valorem tariffs Value of import
• specific tariffs Amount if import
• Combination
• Anti-dumping laws
• To thwart unfair competition

10
Para-tariffs (direct cost influencers)

• Subsidies to encourage exports
• Exchange rate manipulations
• Customs valuation to avoid fraud or to protect
  domestic industry
• Internal taxes and charges
• equivalent to internal taxes sales tax, turnover
  tax or multiple sales tax, value-added tax,
  excise tax
• certain products emission charges,
  administrative charges

11
Non-tariff

• Quota
• Quantity/value
• Sometimes for exports
• Could be on basis of country
• Unilateral/aegis of multilateral trade accords
• Voluntary
• In actuality under threats

12
Non-tariff

• Buy local legislation
• Standards (also called technical measures)
• quality, safety, testing test methods,
  packaging, marking and labeling
• Licenses/permits
• for specific use, specific purchasers, sensitive
  categories
• Reciprocal requirements/barter/counter trade
• Administrative delays, finance measures,

13
Changes in Global Public Policy Environment

• Reduction in domestic policy influence (link)
• External influence overwhelming
• Technology faster innovation spread
• Domestic policies impact other nations
• Complexity in business
• Weakening International Institutions
• Progress in reducing tariffs, not non-tariffs
• E-commerce
• Social clauses
• Sharpening Conflicts - Industrialized Developing

14
Arguments for control

• Increase revenues
• Job Protection
• Increase industrialization/development
• Import substitution
• Infant-industry
• Improve relationships
• National security
• Trade deficit, BOP

15
(No Transcript)