Contents

The political reality id integration................................................................................................................2

Tariffs...........................................................................................................................................................2
1. Specific tarrifs..................................................................................................................................2
2. Ad- velorem tariffs...........................................................................................................................2
Export Tariff.................................................................................................................................................3
Subsidies......................................................................................................................................................3
Import quota...............................................................................................................................................3
Tariff Rate Quota.........................................................................................................................................4
Voluntary export restraint (VER).................................................................................................................4
Quota rent...................................................................................................................................................4
Local content requirement..........................................................................................................................4
ADMINISTRATIVE POLICIES..........................................................................................................................5
Antidumping policies...................................................................................................................................5
The political reality id integration

Many nations are nominally committed to free trade but intervene in international trade

For two reasons

1. Protect the interest of government

2. Promote key domestic producers

As free trade increase international trade, competition in the local markets will increase as well. as a
result domestic producers will face difficulty

Tariffs

Tax levied on imports or exports.

Tariffs falls into two categories

1. Specific tarrifs – Specific tax rate on price. Here tariffs are levied as fixed charge for each unit
of good imported. The tariff rate does not change regarding the quantity.

For example – if tariff rate is 10% per tons of rice, there will be 10% tariff charged for each ton of
rice regardless the fact if someone imports 100 tons of rice or 1000 tons of rice or 10000 tons of
rice.

2. Ad- velorem tariffs – Tax levied as a portion of the value of the imported good. Here the
tariff rate changes as the quantity of the imported/exported good changes.

For example – if government impose ad-velorem tariff on rice, it might charge 10% tariffs on the
import of 1 to 100 tons of rice. And for importing 101 to 200 tons, it could place a tariff of 20%.

Tariffs are placed on imports to protect domestic producers from foreign competition by raising the
price of imported goods. Tariffs also produce revenue for the government.

two conclusions can be derived from economic analysis of the effect of import tariffs.

First, tariffs are generally pro-producer and anti-consumer. While they protect producers from
foreign competitors, this restriction of supply also raises domestic prices.

Second, import tariffs reduce the overall efficiency of the world economy. They reduce efficiency
because a protective tariff encourages domestic firms to produce products at home that could be
 produced more efficiently abroad. Which results in countries missing out their most effective
product

Export Tariff

An export tariff is a tax placed on the export of goods.

The goal behind an export tariff is to discriminate against exporting in order to ensure there is sufficient
supply of a good within a country

For example, Bangladesh in the past placed an export tariff on the export of coal. To ensure sufficient
availably of coal in the country.

Subsidies

A subsidy is a government payment to a domestic producer.

Subsidies take many forms, including cash grants, low-interest loans, tax breaks, and government equity
participation in domestic firms.

To help out farmers Bangladeshi government recently funded disaster aid if crop damage is suffered.

Subsidies are very common in agricultural sectors. In Bangladesh government is recently providing a lot
of subsidies to the ICT sector also.

By lowering production costs, subsidies help domestic producers in two ways: (1) competing against
foreign imports and (2) gaining export markets.

The main gains from subsidies accrue to domestic producers, whose international competitiveness is
increased as a result.

Import quota

An import quota is a direct restriction on the quantity of some good that may be imported into a
country.

For example, the United States has a quota on cheese imports. The only firms allowed to import cheese
are certain trading companies, each of which is allocated the right to import a maximum number of
pounds of cheese each year
Tariff Rate Quota

A common hybrid of a quota and a tariff is known as a tariff rate quota. Under a tariff rate quota, a lower
tariff rate is applied to imports within the quota than those over the quota.

It’s a form of applying indirect restrictions to limit imports in the country.

For example, an ad valorem tariff rate of 10 percent might be levied on 1000 tons of rice imports into
Bangladesh, after which an out-of-quota rate of 70 percent might be applied.

Voluntary export restraint (VER)

A variant on the import quota is the voluntary export restraint. A voluntary export restraint (VER) is a
quota on trade imposed by the exporting country, typically at the request of the importing country's
government.

For example, Bangladesh imports cars form Japan, here on the request of Bangladeshi government
Japan could impose export voluntary export restraints to restrain the exporting of car to the Bangladeshi
market.

Quota rent

The increased price per product to reduce the loss on imports while government imposes quota is called
quota rent

If the domestic industry of a country lacks the capacity to demand, an import quota can increase the
price of both domestically produce and import goods

Local content requirement

A requirement that some specific fraction of a good be produced domestically.

The requirement can be expressed either in physical terms. for example, obligations such as 70% of the
component parts of a product has to be produced locally.
Or in value terms. For example, obligations such as 70% of the value of a product must be produced
locally.

Local content regulations have been widely used by developing countries to shift their manufacturing
base from the simple assembly of products whose parts are manufactured elsewhere into the local
manufacture of component parts.

Local content regulations provide protection for a domestic producer of parts in the same way an import
quota does by limiting foreign competition.

For example - The Indonesian Bill on Mineral and Coal Mining requires all companies to process and
refine mining products in Indonesia.

ADMINISTRATIVE POLICIES

informal or administrative policies to restrict imports and boost exports.

Administrative trade policies are bureaucratic rules designed to make it difficult for imports to enter a
country.

For example, Japan makes it difficult for foreign vehicle business to compete in their local markets by
setting regulatory hurdles, such as vehicle part standards that don’t exists anywhere else in the world.

Antidumping policies

Dumping is variously known as selling goods in a foreign market at below their cost of production or
selling goods in a foreign market at below their fair market value.

Dumping is viewed as a method by which firms unload excess production in foreign markets.

Some dumping may be the result of predatory behavior. Where producers dump products to firstly drive
out competitors than sell at higher prices as they gain monopoly market.

Antidumping policies are designed to punish foreign firms that engage in dumping. The ultimate
objective is to protect domestic producers from unfair foreign competition.

Although antidumping policies vary somewhat from country to country, the majority are similar to those
used in the United States.

Violation of antidumping policies may result in the offending firm being charged with countervailing
duties. These duties present specific tariffs, which can be fairly substantial and stay in place for up to five
years.
For Example, In 2015, American steel companies alleged that several countries, including China, were
dumping steel into the U.S. market and keeping prices unfairly low. After conducting a review, one year
later the U.S. announced that it would lead to imposing a total of 522% tariffs on certain steel imported
from China as countervailing import duties.