2.02 Exemplify how and why nations develop trade barriers and support export activities

1. 2.02 Exemplify how and why nations develop trade barriers and support export activities

2. 2.02 • Why do some Americans worry about trading with China? • American jobs are lost • China protects domestic products • Difficult for the United States to sell to China • Apple, Facebook, Yahoo!, Cisco, Google, & Microsoft have all been targets of Chinese government • Manipulate currency rates • China prints more of its money & buys US dollars with it • This increases the supply of its currency (Yuan) • Keeps exports cheap but allows them to stockpile US dollars which in time creates issues

3. 2.01 • Practice Quiz available online via Edmodo • Everyone needs to take it by Friday • Key terms • Absolute advantage • Comparative Advantage • Opportunity cost • Commodity • Factors of production • Natural, Human, & Capital

4. Agenda • 15 minutes to finalize paper and submit via Edmodo • If done take the practice quiz for 2.01 • 2.02 notes & activity

5. Current Events • Workplace Concerns • https://www.youtube.com/watch?v=-FfIf24SET8 • Do you think that employer’s should monitor social media sites of employees?

6. Why limit international trade? • Trade barriers – • Government placed restrictions on trade • Three main reasons to implement trade barriers: • Infant industry argument - based on idea that a developing/emerging industry needs time to become globally competitive • Allows new companies a chance to compete without the threat of International competition • Once it becomes substantial; barriers are reduced

7. Why limit international trade? (con’t) • National security argument - based on idea that a country does not want to become dependent upon other countries for products • Japan taxes the import of rice to protect domestic farmers • Land in Japan could be used for other things; however, Japan would be reliant on other countries for its main food source

8. Why limit international trade? (con’t) • Free trade favors rich countries argument – based on idea that large, developed countries have comparative advantages in many areas. • Canadians wary of US dominating their media market. • France has worked to protect its TV and film industry from US domination

9. Review • Main reasons trade barriers are implemented: • Protect select industries, interests, & culture of country • Prevent rich countries from being too influential

10. Commercial Policies • When conducting business in another country you have to know the rules and regulations you will encounter • Know American policies plus countries you choose to do business with • Commercial policies - regulations & restrictions countries use to control international trade. • Tariffs • Quotas • Embargo’s • Non-tariff barries

11. Types of Commercial Policies • Tariff • Also known as a customs duty • Tax placed on imported/exported products • One of most common tools to control trade. • Used as a source of revenue • Import Tariff • Taxes on imported products • Tariffs help ensure imported products are not sold for less than domestic products.

12. Examples of American Tariffs Roquefort cheese • France refused to join the USA in its 2003 Iraq invasion • Bush Administration proposed 300% import tax on cheese • Stayed at 100% • Same as oats, chocolates, cured ham, and other European edibles

13. Examples of American Tariffs Paper Clips • Most sold in the USA are manufactured in America • Why? • 126.94% tariff tax on Chinese manufactured paperclips

14. Example of American Tariffs Tobacco 350% tariff Canned Tuna 35% tariff

15. Non-American Shoe Companies 48% tax New Balance is Boston-based Peanuts 131.8% on shelled 163.8% on unshelled

16. Brooms 32% Tires 35% on China

17. Examples of Tariffs Where is the most expensive place to buy an Apple product? • The average Apple device is $1,348 in this country Brazil

18. German Cars in China • A BMW 650i • Sells for $91,000 in Germany • In China, it sells for $_________ 326,000

19. Commercial Policies (con’t) • Export tariff – taxes placed on goods leaving a country & often used as revenue • Directly raise a products price • Used by countries such as Argentina, Indonesia & Malaysia for certain agricultural products. • US does not use export tariffs.

20. How an exporter can determine their product’s tariff in another country… • http://www.youtube.com/watch?v=B-hz9t6KTFQ • Video clip from International Trade Administration’s Free Trade Administration (FTA) tariff tool for exporters

21. Commercial Policies (con’t) • Import quotas – restrictions on the amount of a product that can be imported into country. • Protects domestic products by limiting competition • Downside of quotas is that limited competition can result in increased prices • Example of Import Quota • The United States & Sugar • World Price of Sugar is $.05 - $.13/lb • United States it is $.20 - $.24/lb • https://www.youtube.com/watch?v=fGOj8kBpsD4

22. Quota Example #2 • In 1981, Japan voluntarily restricted number of cars exported to the US. • Purpose was to give US automakers time to retool for production of fuel-efficient cars, but they used profits for other ventures. • Since there was not a limit on dollar value of exports, Japanese auto makers then exported larger, more profitable cars, & used profits to build car plants in US. • List of products/countries with quotas with Customs Border Patrol • http://www.cbp.gov/trade/quota/guide-import-goods/commodities

23. Items subject to Quotas

24. Commercial Policies (con’t) • Embargo - ban of commerce & trade with another country or group for various reasons. • USA presently has embargos against Cuba, Iran, Sudan and Syria • https://www.youtube.com/watch?v=smS8KTs8rro • 1973 oil embargo by Organization of Arab Petroleum Exporting Countries (OPEC) • OPEC refused to sell crude oil to Europe & US • Gas prices increased from 38.5¢ to more than 55¢ per gallon

25. Commercial Policies (con’t) • Boycott - type of embargo used by participants that believe an organization has done something morally wrong • Naturewatch has long-standing boycott against French multinational L’Oreal for continued use of animal testing for cosmetics • Vegetarians International Voice for Animals (VIVA) has boycott against German-owned Adidas for using kangaroo skins in some types of football boots • http://www.ethicalconsumer.org/LinkClick.aspx?fileticket=cOrT55txMvI%3d&tabid=123 • Boycott activity…use the above link for file

26. Commercial Policies • A Boycott is a type of embargo • Usually occur when a county or company is viewed has doing something morally wrong • http://listverse.com/2011/09/03/10-famous-boycotts/

27. Examples of Boycotts:International Buy Nothing Day • Black Friday boycott of over consumption in Western economies • Canada & USA • Other countries it happens on Saturday

28. Abercrombie & Fitch • Abercrombie & Fitch • 24 girls boycotted store in 2005 for their degrading slogans on shirts • I had a nightmare I was a brunette • Who needs brains when you have these

29. 2002 - 2011

30. Male Shirts

31. http://www.pmddtc.state.gov/embargoed_countries/index.html • Embargo activity… • Assign country, find the effect date and what the embargo addresses. Present to class

32. Commercial Policies (con’t) • Non-tariff barriers – • Barriers based on legislative rules & regulations related to product. • Example • Europe requires GM food products be labeled as “genetically modified”.

33. Commercial Policies • Voluntary export restraints - limit the total amount of products exported • China has voluntarily limited total amount of textiles exported to US. • Japan has voluntarily limited total number of cars exported to US • The United States has chosen to raise prices versus prepare for competition with these countries

34. Commercial Policies • Dumping: Occurs when countries sell products for less than the cost of production • Form of predatory pricing • Attempt of Big Business to gain market share • Detrimental to small business • China is most commonly accused of this practice • https://www.youtube.com/watch?v=SNf528GzJhI • Anti-Dumping laws exist to guard against • Tariffs & quotas are implemented

35. Assignment • Factors of production review of AK • Be specific • How is resource utilized • Infant Industry in America • Boycott Advertisement Assignment

36. Commercial Policies (con’t) • Dumping - when countries export & sell their products for less than cost of production. • Ex) Japan & Brazil were accused of dumping steel in US. • Ex) China was accused of dumping steel fasteners in EU.

37. Commercial Policies (con’t) • Predatory pricing - lowering of price to gain market share. Dumping is type of predatory pricing. Ex) Products include steel, textiles, televisions, computers, hardware and farm crops. • Ex) China has been primary target for anti-dumping complaints. • International Trade Commission (ITC) – current investigations of dumping http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/active/index.htm#safeguard

38. Export Support Systems • Export support systems - developed by countries to encourage exporting • Indirect support activities used by governments to support sale of exports. • Special trade fairs & trade events. The US Commercial Service as part of US Department of Commerce, sponsors events for US businesses. http://www.export.gov/tradeevents/index.asp • Consulates are government appointed officials from one country that reside in another country to represent interests of appointing country’s citizens.http://www.usembassy.gov/ • http://www.state.gov/s/cpr/rls/fco/

39. Export Support Systems (Con’t) • Export subsidies - payments made by governments to support export of products • Direct export subsidies lower price of exported product & can include payments made directly to exporter by government. • Low interest loans may be offered by government • Used by US government and European governments for exported farm products

40. Export Support Systems (Con’t) • Indirect export subsidies - support exporting in roundabout way. • Boeing & Airbus receive help from their governments in research & development of their planes. • This lowers internal costs to companies helping to keep prices lower for their planes & to compete globally • http://www.boeing.com • http://www.airbus.com • http://www.businessweek.com/debateroom/archives/2007/10/airbus_subsidie.html • http://www.govexec.com/dailyfed/0211/02111nj1.htm

41. IMH 2.02 Activity • You Tube videos on Airbus & Boeing • http://www.youtube.com/watch?v=zIn0aF6eTRA • http://www.youtube.com/watch?v=7QcUOPDTfTs • http://www.youtube.com/watch?v=Wy_exNIEuM4 • Research both companies and the subsidies issue & provide their viewpoint on this type of indirect export subsidies. Utilize PPT format • Brief History of Boeing and Airbus • Description of product lines of both • Locations of operations of both • Summary of dispute over indirect export subsidies • Student viewpoint on dispute including for or against these subsidies – Argue your case

42. Export Support Systems (con’t) • http://www.buyusa.gov/ • Home page of US Commercial Service, part of Dept. of Commerce • http://www.youtube.com/watch?v=JO7SHg25gpo&feature=relmfu • US Commercial Service – federal export support video

43. In Conclusion: • http://www.youtube.com/watch?v=RQjobBwvcUU • 5 minute clip on Customs Border Protection trade overview