INSTRUMENTS OF TRADE POLICY

INTERNATIONAL BUSINESS
INTRODUCTION
Trade policy is a collection of rules and regulation
which pertain to trade.
Purpose of trade policy :
To help a nations international trade run more
smoothly, by setting clear standards and goals .
To protect domestic industries from foreign goods.
To maintain favorable balance of payment.
To conserve foreign exchange.
 THE INSTUMENTS OF TRADE
POLICY
TARIFFS
SUBSIDIES
IMPORT QUOTAS
VOUNTARY EXPORT RESTRAINTS
ANTI-DUMPING DUTIES
ADMINISTRATIVE POLICIES
LOCAL CONTENT REQUIREMENTS
TARIFFS
Tariff is a tax levied on imports that effectively raises the
cost of imported products relative to domestic products.

Specific tariffs are levied as a fixed charge for unit of a

good imported. For ex a tariff of Rs 100 on each Tv set.

Ad valorem tariffs are levied as a proportion of the value

of the imported good. For ex 10% tariff on each Tv set.
SUBSIDIES
A Subsidy is a government payment to a domestic
producer. Government can give subsidies in various ways
including cash grants, low interest loans, tax rebates.

Subsidies can help domestic producers to compete

against low cost foreign imports and also help in gaining
export markets.
IMPORT QUOTAS
An import quota is a direct restriction on the quantity of
some good that may be imported into a country.

India monitors imports of approximately 300 items that

are considered to be sensitive, Example alcoholic
beverages.
VOLUNTARY EXPORT
RESTRAINTS

These are the voluntary restraints on the export of a

product, typically on the request of importing country.

A famous example is the voluntary export restraint on the

auto exports by Japan to United states in the 1980s.
ANTI DUMPING DUTIES
Dumping is defined as selling goods in a foreign market
below their cost of production or selling goods in foreign
market at below their FAIR market price.

Anti-dumping duties are the duties which imposed on

that product to make its price higher and prevent the local
manufacturers from illegal below the cost selling
competition.
ADMINISTRATIVE POLICIES
Administrative policies are the bureaucratic rules designed
to make it difficult for importers to enter a country.

These polices are made regarding food safety and

environmental standards or to stop harmful low quality
products entering in the country.
LOCAL CONTENT
REQUIREMENTS
A Local content requirements demands that some specific
fraction of good be produced domestically, can be in
physical terms or in value terms.

Local content requirements benefit domestic producers

and jobs ,but consumers face higher prices.
 Why do governments
intervene in markets ?
There are two main arguments for government intervention in the
market:

1. Political arguments are concerned with protecting the interests of

certain groups within a nation (normally producers), often at the
expense of other groups (normally consumers).

2. Economic arguments are concerned with boosting the overall

wealth of a nation which benefits both producers and consumers.
THANK YOU