Which of the following is a form of protectionist policies?
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Protectionism (protecting against imports) has arisen in various forms. These include: TariffsA tariff is a tax on imports, which can either be specific (so much per unit of sale) or ad valorem (a percentage of the price of the product). Tariffs reduce supply and raise the price of imports. This gives domestic equivalents a comparative advantage. As such, tariffs are distorting the market forces and may prevent consumers from gaining the
benefit of all the advantages of international specialisation and trade. The impact of a tariff is shown in Figure 1 below. Figure 1 Impact of a tariff The tariff has the effect of shifting the world supply curve vertically upwards by the amount of the tariff. The level of imports will fall from QaQd to QbQc. The government will
also raise revenue, shown by the blue shaded area. The level of domestic production will increase from 0Qa to 0Qb. QuotasQuotas have the effect of restricting the maximum amount of imports allowed into an economy. Once again, they reduce the amount of imports entering an economy and increase the equilibrium price within the market. The government receives no revenue from a quota, as it does with a tariff, unless it can set up a system of licences. Exchange controlsThe government could limit the amount of foreign currency available for paying for imports. These are not allowed amongst member states of the European Union (EU), for example, and have become more difficult to sustain in a world of highly mobile capital. Export subsidiesExport subsidies allow exporters to supply the market with more product than the natural equilibrium would have allowed. Foreign consumers will enjoy increased economic welfare as the price of their purchases fall. Domestic employees might enjoy more wages and job security. But taxpayers are footing the bill for this. Domestic firms might divert trade into exports and ignore the home market. This could lead to increases in domestic prices. The impact of a subsidy is shown in Figure 2. The supply curve is shifted vertically downwards by the amount of the subsidy and this leads to a lower equilibrium price and a higher quantity being traded. Figure 2 The effect of a subsidy These 'expenditure-switching' polices are normally not allowed under membership conditions of both the WTO and EU. Voluntary export restraints (VER's)Some quotas are voluntarily agreed between countries. This happened on a significant number of occasions with Japanese firms (e.g. cars, televisions, videos) during the 1990s. Where the quotas have been agreed, they are known as Voluntary Export Restraints (VER's). In fact over 200 VER's were in force in the early 1990s. So why did the firms agree to these restrictions voluntarily? Well, the answers to this are varied. Often it may have been because they felt it would help avoid more punitive restrictions, but sometimes it was in their interests. Where the Japanese firms had a significant cost advantage over the domestic producers, the voluntary quotas meant that they could charge significantly higher prices. The higher margins they earned more than made up for the restricted number they sold and profitability was maintained or improved. Other protectionist measuresCountries can also use a range of other protectionist measures to restrict imports. These might include:
31) Which of the following is a form of protectionist policies?A) patentsB) tariffsC) foreign direct investmentD) bribesAnswer:B We have textbook solutions for you!The document you are viewing contains questions related to this textbook. International Financial Management Madura Expert Verified 32) ________ poses a severe and random political risk to company personnel and assets, andinterrupts the conduct of business.D Get answer to your question and much more Skill:Application33) If a foreign-based firm borrows money from a host country bank as a hedge against beingforced out of operation without adequate compensation, the firm is managing political risk with________.A Get answer to your question and much more Skill:Application34) Political risk insurance and local debt financing are both forms of ________.D Get answer to your question and much more 35) Which of the following is a form of hedging?A) expatriate control in key positionsB) development assistanceC) local debt financingD) localization of the operationAnswer:C 36) A country's ability or intention to meet its financial obligations determines its ________.D Get answer to your question and much more 37) Which of the following is analyzed through the quantitative approach, qualitative approach,and the checklist approach?B Get answer to your question and much more 38) The ________ method of analyzing economic risk attempts to measure statistically acountry's ability to honor its debt obligation by assigning different weights to economicvariables.A Get answer to your question and much more 39) Which two factors are primarily assessed when using the qualitative approach to measure acountry's economic risk?A) the country's natural resources and its long-term national debtB) the competence of the country's leader and the economic policy directionC) the probability of terrorism and the likelihood that the country's debts will be repaidD) the country's purchasing power overseas and the consistency of the country's leadershipAnswer:B 40) Representatives of a multinational firm seek an interview with local government leaders inthe Department of Commerce in Argonia with a view to assess the types of policies likely to beimplemented. According to Mathis, this is an example of ________.A Get answer to your question and much more Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document |
