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Barriers to Trade. SSEIN2a: Define trade barriers as tariffs, quotas, embargoes, standards, and subsidies. SSEIN2b: Identify costs and benefits of trade barriers over time SSEIN2c: List specific examples of trade barriers. What are Trade Barriers?. - PowerPoint PPT Presentation
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BARRIERS TO TRADE
SSEIN2a: Define trade barriers as tariffs, quotas, embargoes, standards, and subsidies.
SSEIN2b: Identify costs and benefits of trade barriers over time
SSEIN2c: List specific examples of trade barriers.
WHAT ARE TRADE BARRIERS? Any form of governmental or operational
activity or restriction that renders importation of some goods into a country difficult or impossible.
TARIFF’S Definition: a tax placed on imports to
increase their price in the domestic market.
Two types:Protective tariff – designed to make
domestic products cheaper than their foreign made rivals.
Revenue tariff – generates revenue for the government without making the product more expensive than the same domestic products.
TARIFF’S: Costs:
Price of goods increases.Reduced competitionHidden costs of political and cross-
industry retaliation.
BENEFITS OF TARIFF’S Protect young domestic industries from
foreign competition. Protect aging and inefficient domestic
industries from foreign competition. To protect domestic companies from
“dumping” from foreign companies or governments.
EXAMPLES OF TARIFF’S In the year 2000, tariff’s were increased 8-
30% on imported steel. Goal was to save jobs in the U.S. steel industry.
Tariff’s are placed on imported cars depending on the value of the car.
QUOTA Definition: A specific number or proportion of
a good allowed to be imported into the country.
QUOTA: COSTS AND BENEFITS Costs of Quota’s
ShortagesHigher prices
Benefits of Quota’sDomestic job protectionDomestic industry protection
QUOTA’S: EXAMPLES In 1981, President Reagan put a limit on the
number of imported cars that foreign car produces could bring into the United States. Consumers had fewer cars to choose from Prices were higher than they would have been
without the quota.
Sugar quota’s have been in effect for 50+ years Limits the amount of imported sugar Protects U.S. sugar industry.
EMBARGO’S Definition:
A government prohibition against the shipment of certain products to a particular country for economic or political reasons.
EMBARGO: COST/BENEFITS Costs:
Loss of importsHuman rights
BenefitsPolitical leverageIncrease in substitutes
EMBARGO Example: Cuba embargo began in 1963 and
still continues today. No imports or exports allowed No free travel between the countries
STANDARDS Definition:
Laws that promote the health and safety of products and services within the country.
STANDARDS: COST/BENEFIT Costs:
Increased cost of inputs Increased pricesDecreased competition
Benefits:Safer productsHigher quality productsRecourse against products not made to
specifications.
STANDARDSExamples:
Cars must have seat beltsToys cannot be made with lead
paint.
SUBSIDIES Definition: a government payment to
an individual, business, or other group to encourage or protect a certain type of economic activity.
SUBSIDIES: COSTS/BENEFITS Costs:
Protects inefficient industriesWhen repealed, costs go up and
producers leave the market
Benefits:Lowers the cost of productionEncourages current producers to
remain in the market and new producers to enter
SUBSIDIES Examples:
Dairy farmers receive subsidies to help them stay in business.
Research and production of biofuels