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Illustration of creating trade barriers

1. South Korea South Korea is one of the largest exporters of automobiles. It has a fast growing car market. While seeking to export its cars to various countries and seeking open policy from them, it has kept its own domestic market out of bounds for foreign car makers. Out of 1.1 million cars sold in 1994, only 4000 cars were made outside South Korea. Apart from higher tariff ( import duties), it also levies 15% Acquisition Tax on all imported cars classifying them as luxury even if they are half the local car price. Government also restrict number of showrooms a foreign car manufacturer can open. There is no credit facility available for imported cars, All TV channels sponsor time and ad slots are booked by local manufacturer for indefinite period Dried peas are classified as luxury goods and taxed very heavily. Foreign sausages consignment ( American) was seized by Korean customs and held for months because the they felt that sausages should have 30 days expiration whereas Korean customs have wrongly classified it to be 90 days expiry. The argument of 30days or 90 days was internal to customs but goods were not cleared nevertheless. Korea has licensing system for Citrus fruits. When the first consignment of Californian oranges arrived, this was kept in hot sun for 3 weeks awaiting clearance. After custom clearing the consignment, this was rejected as sub standard. Similar is the case with Californian Almonds which wait for weeks in the open in Korean ports for custom clearance. 2. Japan Rice is a very emotional issue among Japanese. For years they have been told that rice grown in foreign countries is unsuitable for their palates as well as possibly unhealthy. When poor weather destroyed the 1993 rice harvest, it was forced to import 70% of its requirement. In future Japan wants to restrict imports to max 4% of the consumption by using high tariff to protect local farmers. The tariff rate is 580% When rice was first imported, media went in to hysterical drive showing rice with dead mice, cigarette butts and bottle caps. Japanese Food Agency has announce that it did not find any evidence of what has be publicized by Newspapers. California rice is similar to Japanese rice in characteristics ( sticky) and taste but Japanese media used scare campaign to claim that American rice contain higher pesticide which causes abortion and Cancer. Japanese government has to step in to issue the clarification that they did not find any such thing and imported rice has met all quality standards 3. China China uses following to keep the foreign goods out of local market - Confusing tariff system and frequent changes - Licensing - Credit Restriction

On Tobacco, China imposes 450% duty. Further, American tobacco import is restricted on the ground that it carries Blue Mold even though this disease has been eradicated 3 decades ago. Chinas duty system differs from province to province. Import is based on quota which is not published. All exporters have to handover the foreign exchange to central government which allocates it for import restricted to 50% of earning. 4. European Union EU uses VAT as an effective means of to control the activities of foreign firms. Although foreign companies are entitled to refund of VAT on purchases made in EU, the process to claim the refund is confusing, frequently changing, cumbersome and very difficult. Earlier, one could claim VAT refund for previous five years, suddenly they changed it to only last year. A misspelling can delay the refund. Multiple forms must be acquired and filled in the language of VAT country. Original receipts of payment of VAT must be submitted. 3Com has to engage an official @ $600 per hour just to identify the official who has to be contacted for claiming the refund. It took weeks to get the refund forms. It took 6 months for France official to send a letter demanding original receipt. One year later, France asked 3Com for a proof that it is an US corporation. A 6 page form has to be filled in this respect. After 2 years of correspondence, it finally got a refund of $50,000 , about 1/10th of the original claim. Due to this experience, IBM and 3Com engage agents to claim the refund who charge 15-25% of the refund as fees.