CHAPTER 5: International Trade

PROTECTION Nguyen Thi Minh Anh

COURSE CONTENT
1. Definition
2. Effects of protection
3. Harmonized system of tariff classification (HS code)
4. Protection of Intellectual assets
WHAT IS PROTECTION?
- A measure that raises the price of an imported good
- A measure that reduces the supply of foreign good
- A policy that gives domestic firms an advantage
Trade protection is a measured and purposeful policy by a
nation to control imports while promoting export
ADVANTAGES OF
PROTECTION
- Protects a country's new
industries from foreign
competition
- Temporarily creates jobs
for domestic workers
- Fall in Imports

 GDP
DISADVANTAGES OF
PROTECTION
- Companies without
competition decline in quality
 Stagnating Technological
Advantages
 Limited Choices for the
Consumers
- Leads to outsourcing of jobs
- Slows economic
growth/Economic Isolation
WHAT ARE THE
EFFECTS OF
PROTECTION?
 Lack of
High price
competition

- Higher price of imported subjects (final user/producer

/equipment company)
 deteriorate competitive position
 demand fall
- Higher imported input  affect the export producing
 Lack of
High price
competition
- Domestic market is protected
 reduce efforts to innovate and improve the quality of
goods
- Timely delivery
- Quality control
 LOWER PRODUCTIVITY GROWTH
 Standardization
Exchange
Subsidy Controls

Quantitative Rules of
restrictions origin

WHAT KINDS OF
Tariff PROTECTION Restrictio
ARE THERE? n on FDI
TARIFF
- Taxes/duties that impose on the imports of goods and
services.
- Ad valorem = a percentage of the cost of the item
QUANTITATIVE
RESTRICTIONS (QRs)
- A numerical limit set on the volume of the goods and
services that is allowed to be imported
- Quota / non-tariff trade barriers
- Importers must present their license in order to import
the product specified on the license
- By the 1970s, almost all QRs had been abandoned by
the advanced economies (GATT/WTO)
STANDARDIZATION
- Policies and the guidelines shall be followed during the
import of foreign goods and services.
- Administrative obstacles, Health and safety standards,
and environmental standards…
- Set the same safety standard for imports and
domestically produced goods but make testing procedures
much more rigorous for imports
EXCHANGE CONTROLS
- Limit the amount of foreign currency that is available
for payment of imports
RULES OF ORIGIN (ROOs)
- Prevent exporters outside
the zone (in FTAs)
- Impose a domestic content
requirement on the final
assemblers
Domestic content requirements
for final-product producers
specify that a given product
may qualify for needed
imported commodities only if
the percentage of its costs spent
on domestic inputs exceeds a
certain threshold.
RESTRICTIONS ON FDI
- Prevent foreign nations from entering internal market

SUBSIDY
HOW DO EFFECTS OF
QRs DIFFER FROM
THOSE OF TARIFFS?
 ARE THERE OTHER
REAL-WORLD
DIFFICULTIES WITH
TARIFFS?
 - Tariff classification
- Under GATT/WTO
auspices
- Consists of:
21 Sections
Harmonized Commodity 97 Chapters ( Chap
98 + 99 are specific
Description and Coding to each country)
System
- Important criterias:
+ Name
+ Products' use
+ Material
+ Properties, composition, specifications, etc.

Example:
 For
For
governmen
ROLES t
enterprises

Determine the
Avoid loss of tax
correct tax rate

Enjoy the
Control quotas benefits from
FTAs

Prepare fully
Save time
documents
 ARE THERE OTHER
REAL-WORLD
DIFFICULTIES WITH
TARIFFS?
- Tariffs imposed • expand production  less
on imports attractive
 a tax on • intermediate/input in the
exports production
• under-invoice the value
• misclassify the import into lower
Evasion of tariffs
tariff rate
• alter a product
• Rules of origin (Domestic content
Ship through third requirements)
country
• smuggling
 PROTECTION OF
INTELLECTUAL ASSETS
INTELLECTUAL ASSETS
- Patents, trade names, trademarks,
and copyrights (inventions, innovations,
works of art, original writings, music,
business names, product names,
corporate logos, package designs
and labels…)
- Identify
INTELLECTUAL ASSETS

Intangible
• immeasurable

Exclusivity
• need permission
TRADE NAME
- The name under which a business functions
- Register at each level for tax purposes  protects the
use of that name
 - Company and product logos and names
 recognizable to end users and
consumers
 distinguishable from competitors
- Trade names,
once registered,
can be considered
in the same category
as trademarks.
- A trademark is valid for
10 years, after which it
can be renewed
- Word, shape, and symbol combinations that appear on
labels and packaging
- Be protected nationally and internationally by
registering them in all markets where a company plans to
operate
- Inventions and unique innovations
- Valid for a non-renewable period of 19 years
- Market-oriented companies vs. Technology-oriented
firms
 THE IMPORTANCE OF
PROTECTING
TECHNOLOGY, KNOW-
HOW, AND NAME
- patents sold for a fee or rented as part of a licensing agreement