Trade policies and strategies

What are trade policies?

• Strategies a country uses to manage international trade, either encouraging or restricting it.

What are restrictive trade policies?

• Measures like tariffs and import quotas that limit trade to protect domestic industries.

What are tariffs?

• Taxes on imports that raise their cost, protect domestic industries, and generate revenue.

What are import quotas?

• Limits on the quantity of imports to restrict foreign market penetration.

What is import substitution?

• A strategy that focuses on producing goods domestically instead of importing them.

What is export promotion?

• Encouraging exports through incentives to strengthen the economy.

What are price-related trade restrictions?

• Tariffs that increase import prices to protect local industries.

How do tariffs work?

• They tax imported goods, making them more expensive and reducing demand.

What are the key impacts of tariffs?

• Protect local industries and generate government revenue.

What is the formula for tariff revenue?

• Revenue = Quantity of Imports × Tariff Rate

What are quantity-related trade restrictions?

• Import quotas that limit the number of goods that can enter a country.

What is the key impact of import quotas?

• Protect domestic production but do not generate revenue like tariffs.

Why do countries impose trade restrictions?

• To protect domestic jobs, infant industries, and national security, and to maintain standard of living and equalize production costs, cultural values.

What is the goal of import substitution?

• To replace imports with domestically made products.

How does import substitution benefit a country?

• Protects infant industries and increases tariff revenue.

What is the goal of export promotion?

• To increase exports by supporting domestic industries.

How does export promotion help an economy?

• Generates foreign exchange and improves global competitiveness.