Question

Explain and critically assess the types and the effectiveness Of the trade policy instruments that states may utilize in order to achieve strategic interests and their overall impact on trade in a globalized world.

Answer 1

TRADE POLICY is a collection of rules annd regulations which helps in trading. Every nation has trade policies. Trade policy helps the international trade to run smoothy by forming clear standards and goals which can be understood by potential trading partners. Trade policy uses seven main instruments :   1.Tarrifs   2.Subsidies 3.Import Quotas      4.Voluntary Export Restraints 5.Local content requirements 6.Administration policy 7.Anti dumping duties

1.TARRIFS: Tarrifs is a fixed charge(tax). The two types of tarrifs are specific tarrif -are levied as a fixed charge for each unit of a good and ad volorem tarrifs- are levied as a proportion of the value of the imported goods.

2.SUBSIDIES: Subsidy  is a payment given by government to a domestic producer. They help producers have a strong competition against foreign imports and it helps them gain export markets.

3.IMPORT QUOTAS:  An import is a direct restriction on the quantity of some good that may be imported into a country. And it is enforced by issuing licenses to a group of individuals or firms. An import quota is basically set below the free trade level of imports and it is called as binding quota and if the quota is set at or above the free trade level is known as non-binding quota.

4.VOLUNTARY EXPORT RESTRAINTS: A voluntarily export restraint is a restriction set by a government on the quantity of some goods that can be exported out of a country during a specified time. These restraints are typically implemented upon the importing nations.

5.LOCAL CONTENT REQUIREMENTS: A local content requirements is a requirement that some specific portion of good to be produced domestically. The requirements may be expressed either in physical terms or value terms. It benefits producers and are used in developing and developed countries.

6.ADMINISTRATIVE POLICIES: Administrative trade policies are the rules that are imposed to make it difficult for imports to enter a country. Administrative instruments benefits producers. Government of all types uses informal or administrative policies to restrict imports and encourage exports.

7.ANTI-DUMPING POLICIES: In international trade dumping is known as selling of goods in foreign market at below their "fair" market value. Fair market value of a good is normally determined to be greater than the costs of producing that good.   

The objective of the trade policy is to increase the economic efficiency, competitiveness, and the growth of more exports.