CHAPTER 5: PROTECTION International Trade

Nguyen Thi Minh Anh

COURSE CONTENT
1. Definition
2. Effects of protection
3. Harmonized system of tariff classification (HS code)
4. Protection of Intellectual assets
WHAT IS PROTECTION?
- A measure that raises the price of an imported good
- A measure that reduces the supply of foreign good
- A policy that gives domestic firms an advantage
Trade protection is a measured and purposeful policy by a
nation to control imports while promoting export
ADVANTAGES OF PROTECTION
- Protects a country's new
industries from foreign
competition
- Temporarily creates jobs
for domestic workers
- Fall in Imports

 GDP
DISADVANTAGES OF PROTECTION
- Companies without
competition decline in quality
 Stagnating Technological
Advantages
 Limited Choices for the
Consumers
- Leads to outsourcing of jobs
- Slows economic
growth/Economic Isolation
WHAT ARE THE EFFECTS OF
PROTECTION?
 High price Lack of competition

- Higher price of imported subjects (final user/producer

/equipment company)
 deteriorate competitive position
 demand fall
- Higher imported input  affect the export producing
 High price Lack of competition

- Domestic market is protected

 reduce efforts to innovate and improve the quality of
goods
- Timely delivery
- Quality control
 LOWER PRODUCTIVITY GROWTH
 Standardization
Exchange
Subsidy Controls

Quantitative Rules of
restrictions origin

WHAT KINDS OF PROTECTION Restriction

Tariff ARE THERE? on FDI
TARIFF
- Taxes/duties that impose on the imports of goods and
services.
- Ad valorem = a percentage of the cost of the item
QUANTITATIVE RESTRICTIONS (QRs)
- A numerical limit set on the volume of the goods and
services that is allowed to be imported
- Quota / non-tariff trade barriers
- Importers must present their license in order to import the
product specified on the license
- By the 1970s, almost all QRs had been abandoned by
the advanced economies (GATT/WTO)
STANDARDIZATION
- Policies and the guidelines shall be followed during the
import of foreign goods and services.
- Administrative obstacles, Health and safety standards,
and environmental standards…
- Set the same safety standard for imports and
domestically produced goods but make testing procedures
much more rigorous for imports
EXCHANGE CONTROLS
- Limit the amount of foreign currency that is available for
payment of imports
RULES OF ORIGIN (ROOs)
- Prevent exporters outside
the zone (in FTAs) Domestic content requirements
- Impose a domestic content for final-product producers
requirement on the final specify that a given product
assemblers may qualify for needed
imported commodities only if the
percentage of its costs spent on
domestic inputs exceeds a
certain threshold.
RESTRICTIONS ON FDI
- Prevent foreign nations from entering internal market

SUBSIDY
HOW DO EFFECTS OF QRs DIFFER
FROM THOSE OF TARIFFS?
ARE THERE OTHER REAL-WORLD
DIFFICULTIES WITH TARIFFS?

Harmonized Commodity
Description and Coding System
- Tariff classification
- Under GATT/WTO
auspices
- Consists of:
21 Sections
97 Chapters ( Chap
98 + 99 are specific
to each country)
- Important criterias:
+ Name
+ Products' use
+ Material
+ Properties, composition, specifications, etc.

Example:
 For For
ROLES government enterprises

Avoid loss of tax Determine the

correct tax rate

Control quotas Enjoy the benefits

from FTAs

Save time Prepare fully

documents
ARE THERE OTHER REAL-WORLD
DIFFICULTIES WITH TARIFFS?