CSTMQT C4 - Export Policy - Preclass Handouts

International Trade Policy PhD.
Tran Nguyen Chat
INTERNATIONAL TRADE POLICY
Lecturer: PhD. Tran Nguyen Chat

Division: International Business and Trade
Email: trannguyenchat.cs2@ftu.edu.vn
FOREIGN TRADE UNIVERSITY

HOCHIMINH CITY CAMPUS
1
Chapter 4
EXPORT POLICY
FTU-HCMC 1
International Trade Policy PhD. Tran Nguyen Chat
Chapter outline
4.1. The role of export

4.2. Export principles and policies of
Vietnam
4.3. Export incentives
4.3.1. Measures to improve the export
structure
4.3.2. Trade credit and financial measures
4.3.3. Group of institutional measures and
export promotion 3
Roles of exportation to the economy
i. Creating main source of capital to serve the

industrialization and modernization progress;
ii. Contributing to the national economic structure
transfer and production development;
iii. Generating positive impacts on job creation
and improving people’s life;
iv. Making a basis for expanding and promoting
the country’s foreign economic relations.
FTU-HCMC 2
Basic principles and export policies
Depending on:
- Export objectives/goals
- Export missions/tasks
- Export direction and orientation
→ Export development strategy
Export management measures
• Prohibition
• Export licensing
• Administrative procedures
• Foreign Exchange control
FTU-HCMC 3
Rules Relating to Exports
• GATT rules are primarily focused on

imports.
• But countries can apply tariffs to
exports.
– Must be MFN
– Method of levying duties
– All rules and formalities
• Unlike Import tariffs, no provision for
binding.
7
• Similar to Imports, quantitative

restrictions prohibited
• Some exceptions available
FTU-HCMC 4

• Export incentives are allowable
equivalent to:
– Customs duties and other indirect taxes on
inputs consumed in manufacture
– Indirect taxes on the exported product
– Indirect taxes on the production and
distribution of the exported product
• Incentives cannot exceed this
equivalent amount.
• Relief from direct taxes is prohibited. 9
Export promotion measures
Export-oriented production programs:

i. Strategic export commodity development
ii. Export processing
iii. Investment-related measures for production
development and export pattern improvement
iv. Free trade zones (non-tariff zones)
10
10
FTU-HCMC 5
Export promotion measures
Financial support:
i. Export credit/ financing
ii. Export subsidy
iii. Favorable exchange rate policy
iv. Export tariff and tax preference
11
11
Subsidies
• Domestic subsidy
– Payments made to import-competing producers to
raise the price they receive above the market
price
• Export subsidy
– Payments and incentives offered to export
producers intended to raise the volume of exports
12
12
FTU-HCMC 6
Export Subsidy (WTO)
Subsidies: A form of financial aid or support

extended to an economic sector.
There are two general types of subsidies: export
and domestic.
An export subsidy is a subsidy conferred on a
firm by the government that is contingent on
exports.
A domestic subsidy is a subsidy not directly
linked to exports.
13
13
Export Subsidy
Level SCM AoA
Prohibited Red Amber
Actionable Yellow Blue
Non-actionable Green Green
14
14
FTU-HCMC 7
Export Subsidy
• An export subsidy can also be specific or ad valorem
– A specific subsidy is a payment per unit exported.
– An ad valorem subsidy is a payment as a proportion of the
value exported.
• An export subsidy raises the price of a good in the

exporting country, making its consumer surplus
decrease (making its consumers worse off) and
making its producer surplus increase (making its
producers better off).
• Also, government revenue will decrease.
15
15
Export Subsidy
• An export subsidy raises the price of a good in
the exporting country, while lowering it in
foreign countries.
• In contrast to a tariff, an export subsidy
worsens the terms of trade by lowering the
price of domestic products in world markets.
16
16
FTU-HCMC 8
BCA on Export Subsidy
17
17
Big Issues in Agriculture
18
18
FTU-HCMC 9
Market Access
(Tariff Reduction)
19
19
Market Access
• Questions about special products:

What is the minimum number of special
products that your country needs? –
remember there will also be a list of
“sensitive products”
20
20
FTU-HCMC 10
Market Access
• Products not on sensitive or special products list will

be subject to tariff reductions
– higher tariffs, bigger reductions
• There will be long phase-down periods
– With most important products protected this is
less of a worry because developing countries
will have a special safeguard
• Getting the lists of special and sensitive products right
is very important
• Liberalization here is good – benefits consumers and
will help make domestic producers internationally
competitive.
21
21
Export Subsidies
22
22
FTU-HCMC 11
Export Subsidies
• Export subsidies will be eliminated – if there

is an agreement
• Export subsidies are PROHIBITED
SUBSIDIES (RED BOX)
Firms cannot receive the subsidy unless the product
is exported
Firms only receive the subsidy if they use domestic
products instead of foreign products as inputs
23
23
Export Subsidies
• Rules on Prohibited Subsidies

No new Red Box subsidies
If negotiations are successful current users
will have to phase out
If found to have Prohibited subsidy must be
immediately withdrawn – or retaliation
• EU is worried about alternative ways of
subsidising exports – export credits, food
aid, state trading agencies
24
24
FTU-HCMC 12
STEs as Subsidized Exporters
• Currently STEs are almost

unregulated in WTO
– not important when export subsidies
allowed
– A critical gap in policy when export
subsidies are to be eliminated.
25
25
STEs as Subsidized Exporters
• Government can give the STE sufficient

market power to internally cross subsidise
−Profits from one crop used to subsidize
another
−Profits from domestic market subsidize
exports of same crop
• Operate in a non-commercial way - maybe
zero profits.
• Operate export credit schemes guaranteed
by government.
26
26
FTU-HCMC 13
Export Credits
TWO Points of view on export credits:

1. Legitimate correction of “market failure” or
2. An illegitimate “export subsidy”.
• Operationally this is an impossible question

to answer
– While some disciplines on export credits are
provided through OECD agreements, these do
not directly address the issue of STEs and
agricultural trade.
27
27
Export Credits
• WTO and OECD rules are only imperfect ways

to try and prevent illegitimate export subsidies
• If export credits are targeted (granted) only to
some countries:
– ok if correcting a market failure
– but violate WTO principle of non-discrimination
(MFN) if an export subsidy
28
28
FTU-HCMC 14
WTO and Export Credits
• Framework Agreement says:

“Terms and conditions relating to export
credits, export credit guarantees or insurance
programs with repayment periods of 180 days
and below which are not in accordance with
disciplines to be agreed. These disciplines will
cover, inter alia, payment of interest, minimum
interest rates, minimum premium
requirements, and other elements which can
constitute subsidies or otherwise distort trade.”
29
29
Domestic Support
30
30
FTU-HCMC 15
Domestic Support for Agricultural Producers
• Economic analysis concludes that

all subsidies on tradeable products
are trade distorting!
All forms of subsidy will impact on the production

and price of the products in question, and
hence on their international trade. The impact
may be direct or indirect, hence the distinction
among categories may have some validity in
the short run. But not in the long run!
31
31
Domestic Support for

Agricultural Producers
• The political solution under negotiation in

the WTO involves categories of
subsidies
– Non – actionable (Green Box) – allowed
without limit
– Actionable (Amber Box) – countervailing
duties if greater than de minimis
32
32
FTU-HCMC 16
Domestic Support for

Agricultural Producers
• Governments are not going to accept limits on

what subsidies they can provide.
– They will accept limits on how subsidies are paid.
• The Green Box will exist and box shifting will
take place.
• Policy-making implications:
– Don’t waste your time and trade talent on analysing
domestic support proposals.
– If your government wants to subsidise farmers,
make sure the subsidy meets the green box
criteria.
33
33
Implementation Issues
34
34
FTU-HCMC 17
Avoiding Commitments
• Countries were able to avoid their
commitment to reduced domestic
subsidy in three major ways:
1. Box shifting of subsidies from Amber to
Green box
– Cannot be controlled
– Means that subsidised developed country
farmers remain in business to compete with
developing country exporters
35
35
Avoiding Commitments
• Developed countries were able to avoid
their commitments in three major ways:
2. “Dirty Tariffication”
– Means that developed countries kept high
barriers to market access
3. Use anti-dumping and countervailing
actions to deny market access to
successful developing country exports
36
36
FTU-HCMC 18
RULES OF ORIGIN
37
37
Rules of Origin (ROO)
• Rules of Origin determine the national origin

of an imported good.
• This is important because many import
regulations:
– Tariff levels
– Preferential arrangements (eg under FTAs)
– Antidumping, countervail, ….
depend on identifying the country where the
good originated.
38
38
FTU-HCMC 19
ROO: Importance
• Uses of Rules of Origin include:

– Commercial policy such as anti-dumping
duties and safeguard measures
– Determination of tariff treatment, MFN or
preferential
– Trade statistics
– Application of labeling or marking rules
– Public procurement
39
39
R.O.O: Two Basic Kinds
• Non-Preferential R.O.O.
• Preferential R.O.O.
40
40
FTU-HCMC 20
Non-Preferential ROO
• Used in WTO - MFN

• Country of origin is the member
where the last substantial
transformation occurred.
• R.O.O. of the importing country are
used to determine origin, recorded
on a certificate of origin required for
entry.
41
41
What was “Last Substantial

Transformation?”
• Three general rules are applied:

–Change of tariff classification (on any
level, though 4-digit level is the most
common)
–Value added-rule (ad-valorem)
–Special processing rule, the minimum
transformation is described.
42
42
FTU-HCMC 21
Preferential ROO
• Apply only to some countries (not

MFN)
• Under an FTA or RTA.
• Danger: the “Spaghetti Bowl” or
“Noodle Bowl” of R.O.O.s due to
multiple trade agreements.
43
43
ROO in the GATT
• No specific GATT provisions deal with

Rules of Origin.
– Each member is free to define Rules of
Origin.
– Many often have different rules for different
uses.
• Harmonization of Rules of Origin would
facilitate trade.
44
44
FTU-HCMC 22
Specific Process Test
• May be a simple general rule.

– Usually uses lists describing for each
product the technical manufacturing or
processing operations that are
important enough to be “substantial
transformation.”
• Origin is the last country where a
specific process on the list occurred.
45
45
Ad valorem Percentage Rule
•The ad valorem percentage rule requires

that at least a certain percentage of the
value of a product is added in a party or
alternatively, that the import content of a
product is no greater than a specific
percentage
46
46
FTU-HCMC 23
Preferential ROO
• Many preferential Rules of Origin

schemes contain more than one
method as alternatives or as
complements.
– This provides more flexible origin rules
for within the region covered by the
agreement.
– Other countries would face stronger
requirements.
47
47
Certificates of Origin
• All preferential arrangements require

certification
– Certification maybe a written form or
electronic.
• Certification may be required with
each importation or multiple
importations.
– Multiple importations may be allowed to
a fixed volume or period. 48
48
FTU-HCMC 24
Certificates of Origin
• Certificates may be completed by a

certifying authority or by the exporter
or importer.
– A certifying authority may be a government
body, a private firm or some other body such
as the Chamber of Commerce.
– The exporter who is often the producer may
have the responsibility.
– Importers may be permitted to complete the
Certification based on “importers’ knowledge.”
49
49
Rules of Origin Verification
• Generally, the potential for origin

verification is available for the
importing or exporting country or for
the two working together.
– Verification can vary from simple
exchange of information to visits to the
producer’s operations.
50
50
FTU-HCMC 25
51
51
FTU-HCMC 26

CSTMQT C4 - Export Policy - Preclass Handouts

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CSTMQT C4 - Export Policy - Preclass Handouts

Uploaded by

Copyright:

Available Formats

International Trade Policy PhD.

Tran Nguyen Chat

INTERNATIONAL TRADE POLICY

Lecturer: PhD. Tran Nguyen Chat

FOREIGN TRADE UNIVERSITY

4.1. The role of export

Roles of exportation to the economy

i. Creating main source of capital to serve the

Basic principles and export policies

→ Export development strategy

Export management measures

Rules Relating to Exports

• GATT rules are primarily focused on

Rules Relating to Exports

• Similar to Imports, quantitative

Rules Relating to Exports

Export promotion measures

Export-oriented production programs:

Export promotion measures

Export Subsidy (WTO)

Subsidies: A form of financial aid or support

Level SCM AoA

Prohibited Red Amber

Actionable Yellow Blue

Non-actionable Green Green

• An export subsidy raises the price of a good in the

BCA on Export Subsidy

Big Issues in Agriculture

• Questions about special products:

• Products not on sensitive or special products list will

• Export subsidies will be eliminated – if there

• Rules on Prohibited Subsidies

STEs as Subsidized Exporters

• Currently STEs are almost

STEs as Subsidized Exporters

• Government can give the STE sufficient

TWO Points of view on export credits:

• Operationally this is an impossible question

• WTO and OECD rules are only imperfect ways

WTO and Export Credits

• Framework Agreement says:

Domestic Support for Agricultural Producers

• Economic analysis concludes that

All forms of subsidy will impact on the production

Domestic Support for

• The political solution under negotiation in

Domestic Support for

• Governments are not going to accept limits on

Rules of Origin (ROO)

• Rules of Origin determine the national origin

• Uses of Rules of Origin include:

R.O.O: Two Basic Kinds

• Used in WTO - MFN

What was “Last Substantial

• Three general rules are applied:

• Apply only to some countries (not

ROO in the GATT

• No specific GATT provisions deal with

Specific Process Test

• May be a simple general rule.

Ad valorem Percentage Rule

•The ad valorem percentage rule requires

• Many preferential Rules of Origin