Question

1. Briefly describe/define the following terms as they relate to international trade.
   1. Export subsidy
   2. Dumping
   3. Anti-dumping duties
   4. Countervailing duties
   5. Safeguard tariff

Answer 1

a. Export subsidy- Export subsidy is a government policy that promotes the export of goods and discourages the selling of goods on the domestic market through direct payments, low-cost loans, tax exemptions for exporters, or foreign ads funded by governments. An export subsidy reduces the price paid by foreign importers, meaning domestic buyers pay more than foreign buyers do. The World Trade Organization (WTO) forbids certain subsidies that are specifically related to export amounts, except for LDCs. Exporters are granted incentives by a country's government to promote the export of goods.

b. Dumping- Dumping is a term which is used in international trade. That is when a country or company sells a commodity at a price which is lower on the international import market than the price on the domestic market of the exporter. Since dumping usually involves significant export volumes of a product, it often endangers the financial viability of the manufacturers or producers of the product in the importing country.

c. Anti Dumping Duties- An anti-dumping duty is a protectionist tariff levied on foreign goods by a national government which it claims is sold below fair market value. Dumping is a mechanism in which a firm sells a commodity at a lower price than the price it usually pays in its own home market. Most countries place strict duties on goods that they claim are dumped on their national market for profit, weakening local industries and markets.

d. Countervailing Duties- Countervailing duty (CVD) is a specific type of duty that is levied by the government to protect domestic producers by counteracting the negative effect of import subsidies. The CVD is therefore an importation tax on imported goods by the importing country. Foreign governments also offer subsidies to their manufacturers to make their goods cheaper, and raise their demand in other countries. To prevent saturation of the market with such products in the importing country, the importing nation government imposes countervailing duty, paying a fixed amount on the importation of these products

e. Safeguard tariff- A member of the WTO may temporarily restrict imports of a product as to take "safeguard" action if its domestic industry is harmed or threatened by injury caused by an increase in imports of similar or directly competitive products. In other words a safeguard measure is a temporary tariff or quota used to protect foreign exporters from a domestic industry. This tariff is levied to ensure the domestic industry is not harmed by unnecessary imports. When introduced, a safeguard mechanism should only be applied to the degree required to avoid or mitigate serious injury, and to help change the industry in question.