Which policy instruments are used by governments to influence international trade flows?
The government has seven specific policy instruments they can use to influence international trade flows.
- Tariffs
A tax or duty that is paid on certain exports and imports.
- Subsidies
Government payment to support domestic producer.
- Import quotas
A direct restriction on the quantity that is allowed to import of a certain product.
- Tariff rate quota
Hybrid of tariff and import quota, meaning they are restricted in quantity and also pay a tariff.
- Voluntary export restraints VER
Usually set up by the exporting country upon request from importing country, which limits the amount allowed to export to the importing country.
- Local content requirements LCR
The decision to require that a certain proportion of a production of a product is done domestically, and the rest can be imported.
- Administrative policies
Rules that make it difficult to enter with import into a country.
- Antidumping policies
Rules on how to handle dumping strategies.
Learn More :
Government Policy and International Trade
- What are the implications for managers of developments in the world trading system? Why should a manager of an international firm care about the political economy of free trade or about the relative merits of arguments for free trade and protectionism?
- What is the development of the world trading system like and the current trade issue?
- What are the arguments against strategic trade policy? What would happen then if we let government intervene to support domestic firms in order to help them gain first-mover advantages?
- Why do governments sometimes intervene in international trade?