IB_exam_2

Policy Instruments of Trade Policy

The tools used by governments to regulate international trade, including tariffs, quotas, and subsidies.

Specific Tariff

A fixed charge applied per unit of imported goods, e.g., $3 per barrel of oil.

Ad Valorem Tariff

A tariff levied as a percentage of the value of the imported good, e.g., 50% of the value of a car.

Export Ban

A policy that restricts the export of a good, either partially or entirely.

Subsidy

A government payment to a domestic producer that can take various forms such as cash grants or tax breaks.

Import Quota

A direct restriction on the quantity of a good that may be imported into a country.

Voluntary Export Restraint (VER)

A quota on trade imposed by the exporting country at the request of the importing country's government.

Local Content Requirement

A requirement that a certain fraction of a good must be produced domestically.

Antidumping Policies

Rules designed to protect domestic producers from foreign competition that offers products at unfairly low prices.

Foreign Direct Investment (FDI)

Investment by an individual or firm into new facilities to produce or market a product/service.

Greenfield Investment

Establishment of new facilities in a foreign country.

Brownfield Investment

Mergers and acquisitions of existing firms in a foreign country.

Economic Integration

Agreements between countries to reduce trade barriers for the free flow of goods and services.

Free Trade Area

A region where member countries have eliminated trade barriers among themselves.

Customs Union

An agreement that eliminates trade barriers and adopts a common external trade policy.

Common Market

A type of integration that removes trade barriers and allows the free flow of production factors.

Transnational Strategy

A strategy that seeks to simultaneously achieve low costs while differentiating products in different markets.

International Strategy

A strategy where products are produced for the domestic market and sold internationally with minimal local customization.