Trade Policy

Export and Import Policy

It influences:
• Volume
• Direction, &
• Composition of Trade
 Objectives
• Balanced Growth
• Price Stability
• Exchange Rate Stability
• BOP Equilibrium
Two Theoretical Policy options
• Free Trade: No Artificial
Restrictions on Import and Export

• Protection/ Protective Trade

Policy: Barriers to Free Trade
 Tools/Instruments of Trade Policy
• Quantitative Tools • Qualitative Tools
– Tariffs: Import Duties/ – Export Promotion
Custom Duties Policies
– Quotas – Child Labour content
– Subsidies: Land, – Environmental
electricity, lower considerations
interest rates, Tax – Preferential Buying by
concessions, other the Government
facilities at lower than
market rates
 Advantages of Free Trade
• Optimum Allocation of Global Resources
• Greater Employment, income, consumption
leading to Greater Welfare
• Availability of wider variety of goods and
services at cheaper rates
• Greater Competition and no monopoly
• Greater Equality of Incomes and wealth
• Greater Interdependence leading to Stability and
World Peace
 Arguments in Favour of Protection

• Diversification of Industry Argument

• Employment Promotion Argument
• BOP Argument
• Balanced Growth Argument
• Cheap Labour Argument
• Anti- Dumping Argument
• Self Sufficiency Argument
• Defence Argument
 Tariffs
• Revenue Tariffs, Protective tariffs

• Single column, Multiple column tariffs

• Specific, Ad-Valorem Import Duties

 Quotas

• Tariff Quota
• Import License
• Unilateral Quotas
• Bilateral Quotas
• Mixing Quotas