Trade policy is a collection of rules and regulations which pertain to trade. Every nation has some form of trade policy in place, with public officials formulating the policy which they think would be most appropriate for their country. The purpose of trade policy is to help a nation's international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually beneficial trade policies.
Trade policy uses seven main instruments:
1. Tariffs
2. Subsidies
3. Import Quotas
4. Voluntary Export Restraints
5. Local content requirements
6. Administration policy
7. Anti dumping duties.
1) Tariff:
An import tariff is a tax collected on imported goods. Generally speaking, a tariff is any tax or fee collected by a government. However, the term is much commonly applied to a tax on imported goods. There are two basic ways in which tariffs may be levied:
1. specific tariffs &
2. Ad valorem tariffs.
1. Specific tariffs:
Are levied as a fixed charge for each unit of a good imported.
2. Ad volorem Tariffs:
Are levied as a proportion of the value of the imported goods.
A tariff raises the cost f imported products. In most causes, tariffs are put in place to protect domestic producers from foreign competiotion.
Gainers:
1. The government gains, because the tariff increases govt. revenues.
2.Domestic producers gain because the tariff affords them some protection against foreign-competitors by increasing the cost of imported foreign goods.
Sufferers:
1.consumers suffer, because they must pay more for certain imports.
2) Subsidies:
A subsidy is a government payment to a domestic producer. Subsidies take many forms including cash grants, low-interest, tax breaks and government equity participation in domestic and government producers in two ways:
1. They help producers compete against...