Barriers To Trade

Barriers to Trade- Green JA Book Warm Up #1 4/17/2015 Barriers to Trade- Green JA Book P. 271 in Green JA Book – Finding a Compromise P. 273 in Green JA Book – Barriers to Trade

Effects of Trade Barriers Trade Barrier – anything that prevents trade from occurring between nations Positive Effects protect domestic industries – reduces foreign competition – protects jobs Increase government revenue – can reduce budget deficit Negative Effects Fewer Choices and higher prices for consumers Encourages other nations to impose trade barriers against the U.S., hurting American exporters

Barriers to Trade Tariffs: A Tariff is a tax that must be paid when imports come into a country. For example: South Korea has a 40% tariff on beef. It the U.S. wanted to sell $ 1million of beef in the Korea, they would have to pay $400,000 in taxes for the right to sell it.

Barriers to Trade Quotas: A quota limits the amount of a product that can be legally imported into a country. For example: In 1981, the Japanese Government and the Japanese automobile industry accepted a “voluntary” quota for Japanese cars to be sold in the U.S. This quota reduced the number of Japanese cars sold in the U.S. from 1.82 million in 1980 to 1.68 million in its first year, an 8% reduction.

Barriers to Trade Embargoes: An embargo is the complete elimination of trade with people and businesses in a particular country. It is an extreme case of quota, with the quota set at zero. For example: the U.S. has had an embargo on trade with Cuba since 1962 p. 380 – Read “Should the Trade Embargo on Cuba be lifted?” Summarize each viewpoint and answer questions 1-3.

Barriers to Trade Subsidies: This policy reduces costs for producers, often to promote exports to other countries. For example: the U.S. Government makes low cost water available to farmers in eastern Washington state to grow wheat on desert lands. Over 90% of the wheat grown there is exported to other countries. The U.S. government subsidizes farmers who are then able to undersell other farmers in the world market. Export subsidies are a way to keep family farms in business. The French government subsidizes the dairy and wine industries.

Barriers to Trade Standards (Safety and Environmental): This policy prohibits or restricts the sale of any product that does not meet specific standards set by a government. If these standards are different from those of the U.S. producers, they serve as a trade barrier.

What kind of trade restriction is this? T= Tariff , Q= Quota, E= Embargo, ST= standards, and Su= subsidies China’s most favored nation trading status will be taken away if congress and the President agree that the Chinese Government is guilty of human rights abuses. All Chinese imports will experience a sharp increase in taxes if China is no longer considered a most favored nation. Japanese auto firms agree to limits set in Washington D.C., on the # of Japanese cars that may be sold in the U.S.

What kind of trade restriction is this? T= Tariff , Q= Quota, E= Embargo, ST= standards, and Su= subsidies 3. U.S. State department officials confirm that the current Administration has decided to continue the prohibition of all U.S. trade with Cuba. 4. Congress passes a law requiring that all foreign-grown vegetables sold in the U.S. must be organically grown (no use of chemical fertilizers and herbicides) 5. U.S. farmers are allowed to obtain irrigation water from federal dam projects at very low prices to grow rice in the CA desert, if they promise to sell 90% of the rice to buyers in Asia.

What kind of trade restriction is this? Answers Tariff Quota Embargo Standards Subsidies