Trade Policy Tools

  1. Import Tariffs An import tariff is a tax collected on imported goods. Generally speaking, a tariff is any tax or fee collected by a government. Sometimes tariff is used in a non-trade context, as in railroad tariffs. However, the term is much more commonly applied to a tax on imported goods.
  2. Import Quotas Import quotas are limitations on the quantity of goods that can be imported into the country during a specified period of time. An import quota is typically set below the free trade level of imports. In this case it is called a binding quota. If a quota is set at or above the free trade level of imports then it is referred to as a non-binding quota. Goods that are illegal within a country effectively have a quota set equal to zero. Thus many countries have a zero quota on narcotics and other illicit drugs.
  3. Export Subsidies Export subsidies are payments made by the government to encourage the export of specified products. As with taxes, subsidies can be levied on a specific or ad valorem basis. The most common product groups where export subsidies are applied are agricultural and dairy products.

Other Trade Policy Tools

  1. Government Procurement Policies A Government Procurement Policy requires that a specified percentage of purchases by the federal or state governments be made from domestic firms rather than foreign firms.
  2. Health and Safety Standards The U.S. generally has more regulations than other countries governing the use of some goods, such as pharmaceuticals. These regulations can have an effect upon trade patterns even though the policies are not designed based on their effects on trade.
  3. Red-Tape Barriers Red-tape barriers refers to costly administrative procedures required for the importation of foreign goods. Red-tape barriers can take many forms. France once required that videocassete recorders enter the country through one small port facility in the south of France. Because the port capacity was limited, it effectively restricted the number of VCRs that could enter the country. A red-tape barrier may arise if multiple licences must be obtained from a variety of government sources before importation of a product is allowed.

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