ENTRY BARRIERS WEEK 3

Restrictions on Entry of Goods Outright Prohibition Tariff Barriers Non-Tariff Barriers

Outright Prohibition Illicit Drugs Endangered Species Certain Foods Certain Books & Materials Certain Products or Products from Certain Countries

Tariff Barriers (Tax on consumption of imports) Standard Tariffs Anti-Dumping Tariffs Countervailing Tariffs

Standard Tariffs Ad valorem Specific Compound a specified percentage of the value of merchandise. Specific a specified amount per unit of weight or other quantity. Compound a combination of ad valorem and specific.

Tariff Calculation Suppose the U.S. imposes an ad valorem tariff rate of 25% on import of a product. This means that if the U.S. importer paid $100 to a foreign manufacturer at the point of shipping in the foreign country (FOB), the importer must pay $25 to the U.S. Government. Note that the cost of tariffs is passed on by the importer to the consumer.

(a) the fair market value in the manufacturer’s home market, or Anti-dumping tariffs Imposed when imported merchandise is sold to importers in the United States at a price that is less than- (a) the fair market value in the manufacturer’s home market, or (b) cost of production.

Countervailing tariffs Imposed when imported merchandise has received subsidies provided by the government in the exporter’s home country.

Non-Tariff Barriers Quotas Import License Exchange Permission Product Standards Customs Procedures

Quota A decision by the importing country about how much of a particular product can be imported in the country from different countries in a year.

Voluntary Export Restraint A quota set by the exporting country on how much of a particular product can be exported to a particular country on a year.

Why countries restrict imports? Health and Safety National Security Moral Standards Employment Infant & Import Damaged Industries and, Strategic Industries

Restrictions on Equity Outright Prohibition Ownership Restriction Technology Requirement Local Content Requirement Local Employment Requirement Export Requirement

U.S. does not restrict equity.

Why countries restrict equity? To Prevent: Hollowing Out Exploitation of Resources Outflow of Profits Decisions Favoring Home Country Destruction of Strategic Industries Threats to National Security

Who bears the cost of the barriers? Consumers

Who benefits from the barriers? U.S. producers of products similar to the imported products on which barriers are imposed.

Yet, they love capital! You can get: Tax Concessions Tariff Concessions Subsidies