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ENTRY BARRIERS
(TARIFF AND NON-TARIFF)
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In spite of theoretical justifications Given by Adam

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Smith, Ricardo and Hecksher Ohlin regarding
gains which arise due to free trade, nations all over
the world, interfere in international trade.

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RATIONALE FOR GOVERNMENT
INTERVENTION

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 Unemployment: (one of the most common)
 Common Agricultural Policy (CAP) EU.
 Subsidy for farmers in Japan

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 Infant industry argument: (one of the oldest
argument by Hamilton 1792 for protectionism)
 Industrialization argument:
 Essential industries:
 Aerospace, Defense, Electronics, Semiconductor
 Foreign policy objectives:
 UN trade sanctions on Iraq (1991)
 Protection of consumer/ consumer safety:
 Hormone treated beef in EU
 Pentachlorophenol (PCP) used in tanning of leather (affects 3
Indian exports)
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 Human rights:
 Most favoured nation(MFN) status to China before 2001

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 Strategic trade policy:
 Boieng and Airbus (G. Britain, France, Germany,
Spain 1960)
 Semiconductor industry of Japan

 Balance of payment argument:

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INSTRUMENTS OF INTERVENTION

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 Tariff

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 Export tariff (levied on exports)

 Import tariff (levied on Imports)

 Specific duty (per unit basis)

 Ad valorem duty (percentage of value)

 Compound duty (combination of both)

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 Subsidies
 Direct payment given by the government in order to make
it more competitive nationally or internationally.

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Forms:
 Cash grant
 Low interest loans
 Tax benefits
 R&D support
 Government equity participation in local firm.
 Some countries provide subsidies by offering market
information, trade exposition, foreign contacts for potential
exporters.
Example:
 Agricultural subsidy given by most developing nations. 6
 R&D support, Boeing
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 Quota
 Quantity form of restriction imposed on Imports and
Exports

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 The license specifies the maximum amount of
quantity that could be Imported or Exported.
1. Import quota
2. Export quota
 A variation of Import quota is Voluntary
Export Restraint (VER)
 Japan v/s America 1981 (1.68 million cars)
 Embargo:
 Levied on products exported from Japan to India
during tsunami 7
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 Local content requirement
 Some specific fraction of the product be produced
locally.

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Example:
 During recession (2008) America restricts fraction of
work to be done in home country.
 Administrative policies:
 Rules and procedures to be followed.
Example:
 Netherlands exports Tulip bulbs to all nations except
Japan.
 All VCR exported from Japan to France has to pass
through small custom entry point which is distantly 8
located and poorly staffed
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 Customs valuation:
 In order to collect ad valorem duty custom value the goods.
 Sometimes this customs valuation can also be used as an

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instrument (intentionally) by nations to discourage imports
or exports.
Example: Initially SUV was considered truck, US officials
imposed 25 percent duty instead of 2.5 percent.
 Antidumping and countervailing duties:
 Standards:
 Classification, Labelling, Testing standards.
 Place of origin of raw material.

 Reciprocal requirements:
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 Counter trade
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Thank you