What are the principle reasons for international Trade?

Question

Why would we want to restrict trade? What are Tariffs? What are Quotas? What are teh differences between the 2? I need to write a 5 page paper please help!

Answer 1

There are many reasons why we restrict trade, but in recent years many countries are moving towards globalization with no restriction whatsoever.

Tariffs is tax that the government applies to imported goods to limit quantity imported. and Quotas is quantity restriction applied to imported goods to limit quantity imported.

Quotas and Tariffs are created to reduced quantity imported, which will give greater incentives to domestic producers.

In a free market, you have the domestic price which equals the world price. People will demand more, but domestic supply is limited. So, foreign producers make up the supply that is needed to meet the demand. By using any of those systems, you eliminate supply and allow the price to rise and consumption will decrease. Domestic producers will enjoy this since they can increase price at same level of production.

In general, if tariff is used, government receives revenue from foreign firms. Quotas means, instead of the government, foreign firms will receive the portion that government would have received if tariff was used.

That's easiest explanation I can write.

There are many reasons why governments use trade restriction.

In developing nations, they would use restrictions to close the market for advance products (example: electronics). Domestic firms do not have enough power or capitals to compete with strong foreign firms, so the government gives them incentives to grow by letting them control the market until it rises.

In developed nations, governments use restrictions to support decreasing industries. The best example is Agriculture sector. Even though subsidy is used most of the time, you will see some restrictions. Farmers in the U.S. cannot compete against developing nations due to high costs. Therefore, the U.S. cannot let this sector die. There are many theoretical reasons, but mainly due to main food supply. We cannot depend on foreign foods entirely.

Other reason can be that struggling large firms can lobby to apply restrictions. For example, Harley Davidson in early years after WWII, struggled to keep up with European masters. They asked the government to restrict the imports. The government did that and now Harley is one of the biggest firm in the U.S.

Restrictions can help firms when there is decreasing demand as well. When demand was high enough, domestic firms will not feel as pressure from foreign competition. As demand declines, domestic firms will not be able to keep up with low cost production line that foreigners bring.

Keep in mind that restrictions will always hurt consumers. Therefore, there many questions on whether the government is making good decision. Let's say that the government is saying the best way for the U.S. is to guide the steel industry to save 50,000 jobs. That is great that we can save 50,000 jobs, but at same time all Americans will lose significantly in a long run.

If this is economics class, then professors love it when you make cases against trade restriction.

I hope this helps.

Answer 2

The KEYWORD, Justina, in International Trade is RECIPROCITY. In law, it's QUID PRO QUO! Meaning: Something for something:

There's a growing awareness that trade is not just a technical question, but a matter of high political importance. In the World Trade Organization (WTO), the world now has a permanent trade policy forum as well as a more effective means of negotiating commitments and making and enforcing trade rules. Trade and trade policy have been put back in the front row of international concerns, where they were intended to be by the architects of the post-war international institutions. With the establishment of the WTO, and the conclusion of comprehensive agreements for cooperation at every level with the World Bank and the IMF, the matrix of trade and finance and development is not only completed but updated to contribute to global prosperity and stability in the new century. This improved institutional cooperation is a major step towards fulfilling the mandate given to the WTO by governments to work for improved coherence in international economic policy-making!

( Use the above CONTENT for your INTRODUCTION or CONCLUSION! Research WTO)

In re: QUOTA. Explicit limit (usually measured by volume or sometimes by value) on the amount of a particular product that can be imported or exported during a specified time period. A quota may be applied on a selective basis, with varying limits set according to the country of origin, or on a global basis, which only specifies the total limit and thus tends to benefit more efficient suppliers.

In re: TARIFF. Customs duties (tax) on merchandise imports.

Now we're talking about economic sanctions, which are economic penalties applied by one country (or group of countries) on another for a variety of reasons. Economic sanctions include, but are not limited to, tariffs, trade barriers, import duties, and import or export quotas.

Economic sanctions are frequently RETALIATORY in nature. For example, in 2002 the United States placed import tariffs on steel in an effort to protect its industry from more efficient foreign producers, such as China and Russia. The World Trade Organization (WTO) ruled that these tariffs were illegal. The European Union threatened retaliatory tariffs on a range of US goods, forcing the US government to remove the steel tariffs in early 2004. Economic sanctions frequently result in trade wars. The World Trade Organization is the world governing body for trade disputes.

Good luck on your assignment, Justina. A hint: Type your five pages instead of writing long-hand. Extra credit ... maybe! Good luck!

HANK (Josh)

Answer 3

Circulate drugs and weapons accros the world.

Fun stuff.

Answer 4

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