Warmup

1
Warmup

• http//www.youtube.com/watch?vws_K9Cxs-uEfeature
  related
• 5 Questions regarding factors of production
  comparative advantage.
• Questions on back

2
Answer the Following

• Do you think Walmart is using fair strategies?
  Why or why not?
• What new kinds of jobs might be created as a
  result of outsourcing? What jobs might be
  eliminated?
• Who gains the most from Wal-Mart's price
  policies? Why?
• Who has benefited from Wal-Mart? In what ways?
  Who has not benefited from Wal-Mart? In what
  ways?

3
2.02 Exemplify how and why nations develop trade
barriers and support export activities
4
2.02

• Why do some Americans worry about trading with
  China?
• American jobs are lost
• China protects domestic products
• Difficult for the United States to sell to China
• Apple, Facebook, Yahoo!, Cisco, Google,
  Microsoft have all been targets of Chinese
  government
• Manipulate currency rates
• China prints more of its money buys US dollars
  with it
• This increases the supply of its currency (Yuan)
• Keeps exports cheap but allows them to stockpile
  US dollars which in time creates issues

5
2.01

• Practice Quiz available online via Edmodo
• Everyone needs to take it by Friday
• Key terms
• Absolute advantage
• Comparative Advantage
• Opportunity cost
• Commodity
• Factors of production
• Natural, Human, Capital

6
Agenda

• 15 minutes to finalize paper and submit via
  Edmodo
• If done take the practice quiz for 2.01
• 2.02 notes activity

7
Current Events

• Workplace Concerns
• https//www.youtube.com/watch?v-FfIf24SET8
• Do you think that employers should monitor
  social media sites of employees?

8
Why limit international trade?

• Trade barriers
• Government placed restrictions on trade
• Three main reasons to implement trade barriers
• Infant industry argument - based on idea that a
  developing/emerging industry needs time to become
  globally competitive
• Allows new companies a chance to compete without
  the threat of International competition
• Once it becomes substantial barriers are reduced

9
Why limit international trade? (cont)

• National security argument - based on idea that a
  country does not want to become dependent upon
  other countries for products
• Japan taxes the import of rice to protect
  domestic farmers
• Land in Japan could be used for other things
  however, Japan would be reliant on other
  countries for its main food source

10
Why limit international trade? (cont)

• Free trade favors rich countries argument based
  on idea that large, developed countries have
  comparative advantages in many areas.
• Canadians wary of US dominating their media
  market.
• France has worked to protect its TV and film
  industry from US domination

11
Review

• Main reasons trade barriers are implemented
• Protect select industries, interests, culture
  of country
• Prevent rich countries from being too influential
  

12
Commercial Policies

• When conducting business in another country you
  have to know the rules and regulations you will
  encounter
• Know American policies plus countries you choose
  to do business with
• Commercial policies - regulations restrictions
  countries use to control international trade.
• Tariffs
• Quotas
• Embargos
• Non-tariff barries

13
Types of Commercial Policies

• Tariff
• Also known as a customs duty
• Tax placed on imported/exported products
• One of most common tools to control trade.
• Used as a source of revenue
• Import Tariff
• Taxes on imported products
• Tariffs help ensure imported products are not
  sold for less than domestic products.

14
Examples of American Tariffs

• Roquefort cheese

• France refused to join the USA in its 2003 Iraq
  invasion
• Bush Administration proposed 300 import tax on
  cheese
• Stayed at 100
• Same as oats, chocolates, cured ham, and other
  European edibles

15
Examples of American Tariffs

• Paper Clips

• Most sold in the USA are manufactured in America
• Why?
• 126.94 tariff tax on Chinese manufactured
  paperclips

16
Example of American Tariffs

• Tobacco
• 350 tariff

• Canned Tuna
• 35 tariff

17

• Non-American Shoe Companies
• 48 tax
• New Balance is Boston-based

• Peanuts
• 131.8 on shelled
• 163.8 on unshelled

18

• Brooms
• 32

• Tires
• 35 on China

19
Examples of Tariffs

• Where is the most expensive place
• to buy an Apple product?
• The average Apple device is 1,348 in this
  country

Brazil
20
German Cars in China

• A BMW 650i
• Sells for 91,000 in Germany
• In China, it sells for _________

326,000
21
Commercial Policies (cont)

• Export tariff taxes placed on goods leaving a
  country often used as revenue
• Directly raise a products price
• Used by countries such as Argentina, Indonesia
  Malaysia for certain agricultural products.
• US does not use export tariffs.

22
How an exporter can determine their products
tariff in another country

• http//www.youtube.com/watch?vB-hz9t6KTFQ
• Video clip from International Trade
  Administrations Free Trade Administration (FTA)
  tariff tool for exporters

23
Commercial Policies (cont)

• Import quotas restrictions on the amount of a
  product that can be imported into country.
• Protects domestic products by limiting
  competition
• Downside of quotas is that limited competition
  can result in increased prices
• Example of Import Quota
• The United States Sugar
• World Price of Sugar is .05 - .13/lb
• United States it is .20 - .24/lb
• https//www.youtube.com/watch?vfGOj8kBpsD4

24
Quota Example 2

• In 1981, Japan voluntarily restricted number of
  cars exported to the US.
• Purpose was to give US automakers time to retool
  for production of fuel-efficient cars, but they
  used profits for other ventures.
• Since there was not a limit on dollar value of
  exports, Japanese auto makers then exported
  larger, more profitable cars, used profits to
  build car plants in US.
• List of products/countries with quotas with
  Customs Border Patrol
• http//www.cbp.gov/trade/quota/guide-import-goods/
  commodities

25
Items subject to Quotas
26
Commercial Policies (cont)

• Embargo - ban of commerce trade with another
  country or group for various reasons.
• USA presently has embargos against Cuba, Iran,
  Sudan and Syria
• https//www.youtube.com/watch?vsmS8KTs8rro
• 1973 oil embargo by Organization of Arab
  Petroleum Exporting Countries (OPEC)
• OPEC refused to sell crude oil to Europe US
• Gas prices increased from 38.5 to more than 55
  per gallon

27
Commercial Policies (cont)

• Boycott - type of embargo used by participants
  that believe an organization has done something
  morally wrong
• Naturewatch has long-standing boycott against
  French multinational LOreal for continued use of
  animal testing for cosmetics
• Vegetarians International Voice for Animals
  (VIVA) has boycott against German-owned Adidas
  for using kangaroo skins in some types of
  football boots
• http//www.ethicalconsumer.org/LinkClick.aspx?file
  ticketcOrT55txMvI3dtabid123
• Boycott activityuse the above link for file

28
Commercial Policies

• A Boycott is a type of embargo
• Usually occur when a county or company is viewed
  has doing something morally wrong
• http//listverse.com/2011/09/03/10-famous-boycotts
  /

29
Examples of BoycottsInternational Buy Nothing
Day

• Black Friday boycott of over consumption in
  Western economies
• Canada USA
• Other countries it happens on Saturday

30
Abercrombie Fitch

• Abercrombie Fitch
• 24 girls boycotted store in 2005 for their
  degrading slogans on shirts
• I had a nightmare I was a brunette
• Who needs brains when you have these

31
2002 - 2011
32
Male Shirts
33

• http//www.pmddtc.state.gov/embargoed_countries/in
  dex.html
• Embargo activity
• Assign country, find the effect date and what the
  embargo addresses. Present to class

34
Commercial Policies (cont)

• Non-tariff barriers
• Barriers based on legislative rules regulations
  related to product.
• Example
• Europe requires GM food products be labeled as
  genetically modified.

35
Commercial Policies

• Voluntary export restraints - limit the total
  amount of products exported
• China has voluntarily limited total amount of
  textiles exported to US.
• Japan has voluntarily limited total number of
  cars exported to US
• The United States has chosen to raise prices
  versus prepare for competition with these
  countries

36
Commercial Policies

• Dumping Occurs when countries sell products for
  less than the cost of production
• Form of predatory pricing
• Attempt of Big Business to gain market share
• Detrimental to small business
• China is most commonly accused of this practice
• https//www.youtube.com/watch?vSNf528GzJhI
• Anti-Dumping laws exist to guard against
• Tariffs quotas are implemented

37
Assignment

• Factors of production review of AK
• Be specific
• How is resource utilized
• Infant Industry in America
• Boycott Advertisement Assignment

38
Commercial Policies (cont)

• Dumping - when countries export sell their
  products for less than cost of production.
• Ex) Japan Brazil were accused of dumping steel
  in US.
• Ex) China was accused of dumping steel fasteners
  in EU.

39
Commercial Policies (cont)

• Predatory pricing - lowering of price to gain
  market share. Dumping is type of predatory
  pricing.
• Ex) Products include steel, textiles,
  televisions, computers, hardware and farm crops.
• Ex) China has been primary target for
  anti-dumping complaints.
• International Trade Commission (ITC) current
  investigations of dumping http//www.usitc.gov/tra
  de_remedy/731_ad_701_cvd/investigations/active/ind
  ex.htmsafeguard

40
Export Support Systems

• Export support systems - developed by countries
  to encourage exporting
• Indirect support activities used by governments
  to support sale of exports.
• Special trade fairs trade events. The US
  Commercial Service as part of US Department of
  Commerce, sponsors events for US businesses.
  http//www.export.gov/tradeevents/index.asp
• Consulates are government appointed officials
  from one country that reside in another country
  to represent interests of appointing countrys
  citizens. http//www.usembassy.gov/
• http//www.state.gov/s/cpr/rls/fco/

41
Export Support Systems (Cont)

• Export subsidies - payments made by governments
  to support export of products
• Direct export subsidies lower price of exported
  product can include payments made directly to
  exporter by government.
• Low interest loans may be offered by government
• Used by US government and European governments
  for exported farm products

42
Export Support Systems (Cont)

• Indirect export subsidies - support exporting in
  roundabout way.
• Boeing Airbus receive help from their
  governments in research development of their
  planes.
• This lowers internal costs to companies helping
  to keep prices lower for their planes to
  compete globally
• http//www.boeing.com
• http//www.airbus.com
• http//www.businessweek.com/debateroom/archives/20
  07/10/airbus_subsidie.html
• http//www.govexec.com/dailyfed/0211/02111nj1.htm

43
IMH 2.02 Activity

• You Tube videos on Airbus Boeing
• http//www.youtube.com/watch?vzIn0aF6eTRA
• http//www.youtube.com/watch?v7QcUOPDTfTs
• http//www.youtube.com/watch?vWy_exNIEuM4
• Research both companies and the subsidies issue
  provide their viewpoint on this type of indirect
  export subsidies. Utilize PPT format
• Brief History of Boeing and Airbus
• Description of product lines of both
• Locations of operations of both
• Summary of dispute over indirect export subsidies
• Student viewpoint on dispute including for or
  against these subsidies Argue your case

44
Export Support Systems (cont)

• http//www.buyusa.gov/
• Home page of US Commercial Service, part of Dept.
  of Commerce
• http//www.youtube.com/watch?vJO7SHg25gpofeature
  relmfu
• US Commercial Service federal export support
  video

45
In Conclusion

• http//www.youtube.com/watch?vRQjobBwvcUU
• 5 minute clip on Customs Border Protection trade
  overview