Chapter 9 Business 321

Public Choice Analysis

A branch of economics that analyzes public decision making, the special interest will often dominate the general interest on any given issue for a simple reason: Special-interest groups are willing to work harder for the passage of laws favorable to their interests than the general public is willing to work for the defeat of laws unfavorable to its interests

Export Promotion Strategy

A country encourages firms to compete in foreign markets by harnessing some advantage the country possesses, such as low labor costs

Maquiladora

A factory located in an FTZ in Mexico; most are situated near the U.S. border

Foreign Trade Zone (FTZ)

A geographic area in which imported or exported goods receive preferential tariff treatment

Voluntary Export Restraint (VER)

A promise by a country to limit its exports of a good to another country to a prespecified amount or percentage of the affected market. Often this is done to resolve or avoid trade conflicts with an otherwise friendly trade partner

Import Substitution Strategy

A strategy that encourages the growth of domestic manufacturing industries by erecting high barriers to imported goods Australia/Argentina/India/Brazil

Transit Tariff

A tariff levied on goods as they pass through one country bound for another

Tariff

A tax placed on a good that is traded internationally

Infant Industry Arguement

Alexander Hamilton believed that the newly independent country's infant manufacturing sector possessed a comparative advantage that would ultimately allow it to thrive in international markets. He feared, however, that the young nation's manufacturers would not survive their infancy and adolescence because of fierce competition from more mature European firms. Hamilton thus fought for the imposition of tariffs on numerous imported manufactured goods to give U.S. firms temporary protection from foreign competition until they could fully establish themselves

Embargo

An absolute ban on the exporting (or importing) of goods to a particular destination- is adopted by a country or international government authority to discipline another country

Nontariff Barrier

Any government regulation, policy, or procedure other than a tariff that has the effect of impeding international trade

Ad Valorem Tariff

Assessed as a % of the market value of the imported good

Specific Tariff

Assessed as a specific dollar amount per unit of weight or other standard measure

Compound Tariff

Both an ad valorem component and a specific component.

Import Tariff

Collected on imported goods (3 types)

Harmonized Tariff Schedule (HTS)

Detailed classification scheme for imported goods

National Defense Argument

Holds that a country must be self-sufficient in critical raw materials, machinery, and technology or else vulnerable to foreign threats

Free Trade

Implies that the national government exerts minimal influence on exporting and importing decisions of private firms and individuals

Tariff Rate Quota (TRQ)

Imposes a low tariff rate on a limited amount of imports of a specific good; above that threshold, a TRQ imposes a prohibitively high tariff rate on the good

Export- Import Bank of the United States (Eximbank)

Provides financing for U.S. exports through direct loans and loan guarantees

Strategic Trade Theory

Suggests that a national government can make its country better off if it adopts trade policies that improve the competitiveness of its domestic firms in such oligopolistic industries

Fair (Managed) Trade

Suggests that the national government should actively intervene to ensure that domestic firms' exports receive an equitable share of foreign markets and imports are controlled to minimize losses of domestic jobs and market share in specific industries

Export Tariff

Tariff levied on goods as they leave the country

Industrial Policy

When the national government identifies key domestic industries critical to the country's future economic growth and then formulates programs that promotes their competitiveness

Quota

a numerical limit on the quantity of a good that may be imported into a country during some time period, such as a year

Countervailing duty (CVD)

an ad valorem tariff on an imported good that is imposed by the importing country to counter the impact of foreign subsidies.

Dumping

occurs when a firm sells its goods in a foreign market at a price below what it charges in the home market. This type of dumping is a form of international price discrimination. The second type of dumping involves the firm's selling its goods below cost in the foreign market, in which case the dumping is a form of predatory pricing.

Overseas Private Investment Corporation (OPIC)

provides a different type of insurance- political-risk insurance.