1.

How do different theories, namely Mercantilism, Absolute Advantage,

Comparative Advantage. Explain the basis for trade between countries? What
are the shortcomings of each theory?

2. Give the definition of dumping? Give an example. Why is dumping listed as

a form of trade restriction?

3. Give the definition of tariff and its classification. Is the role of tariffs
increasing or diminishing in contemporary international trade practice?
A tariff: a tax (duty) imposed on a product when it crosses national boundaries. (difference btw tariff and
tax)

 Import tariff and export tariff

 Eg: cocoa exports by Ghana, oil exports by OPEC

 “No tax or duty shall be laid on articles exported from any state” US

 Protective tariff and revenue tariff

 Protective tariff: to reduce amount of imports entering a country

 Revenue tariff: to generate tax revenues, placed on either exports or

imports

 Overtime, tariffs decrease as a source of government revenue for

developed countries

 In 1990, 41% US revenue, in 2001, only 1%

There are three types of tariffs

1. A specific tariff

2. An ad valorem tariff

3. A compound tariff

Types of Tariffs

Specific Tariff: (thuế tính theo số lượng) a fixed amount of money per physical unit of the imported
product

 Every German computed imported into US is taxed $100 regardless of price

Ad valorem Tariff: (thuế tính theo giá trị) a fixed percentage of the value

of the imported product.

 15% tax on imported truck. A Japanese truck valued at $20,00 will be taxed:

20.000x 15%= $3,000.

Compound Tariff: (thuế hỗn hợp) a combination of specific and ad valorem tariff.

 Imported TV is taxed $20 each+ 5% its value

4. What is an MNE (Multinational Enterprise)? Why are MNES a source of

conflict?

MNEs have a number of identifiable features. Operating in many host countries,

MNEs often conduct research and development (R&D) activities in addition to
manufacturing, mining, extraction, and business-service operations. The MNE cuts
across national borders and is often directed from a company planning center that
is distant from the host country. Both stock ownership and company management
are usually multinational in character.

Advocates of MNEs often point out the benefits these enterprises can provide
for the nations they affect, including both the source country where the parent
organization is located and the host country where subsidiary firms are established.
Benefits allegedly exist in the forms of additional levels of investment and capital,
creation of new jobs, and development of technologies and production processes.
But critics contend that MNEs often create trade restraints, cause conflict with
national economic and political objectives, and have adverse effects on a nation’s
balance of payments. These arguments perhaps explain why some nations frown
on direct investment, while others welcome it. This section examines some of the
more controversial issues involving multinationals.

- Employment

+ One of the most hotly debated issues surrounding the MNE is its effects on
employ- ment in both the host and source countries. MNEs often contend that their
foreign direct investment yields favorable benefits to the labor force of the
recipient nation.
 + One source of controversy arises when the direct investment spending of
foreign-based MNEs is used to purchase already existing local businesses rather
than to establish new ones.

5. What is the role of World Bank and International Monetary Fund in

providing aid for developing countries?