(Tiểu luận FTU) tiểu luận kinh tế quốc tế INTERNATIONAL TRADE BARRIER AND CASE STUDY IN CHINA

In this paper, we will particularly discuss about international trade barriers and its case study of Trade barriers in China.. Barriers take the form of tariffs which impose afinancial b

FOREIGN TRADE UNIVERSITY SCHOOL OF INTERNATIONAL BUSINESS &ECONOMICS

Nguyễn Trần Mai Linh-1811150092

Vũ Thảo Linh- 1811150097 Phan Thúy Cải- 1817150060 Hoàng Phương Thảo- 1811150123

Vũ Quỳnh Anh- 1813340008

Ha Noi, 11/2019

Table of contents Page

I INTRODUCTION 1

1 Objective of the study 1

2 Limitation of the study 1

3 Methodology of the study 1

II FINDINGS OF THE STUDY 2

1 Theory of International trade barrier 2

1.1 Definition 2

1.2 Characteristics: 2

1.3 Why trade barriers used? 2

1.4 Types of Trade Barriers 3

2 Case Study in China 8

2.1 Introduction 8

2.2 The concept of New Trade barriers in China 8

2.3 The impact of Trade Barriers on China export’s Trade 9

3 Lessons for Vietnamese government 13

3.1 Abstract 13

3.2 Overview 14

3.3 Tariff and non-tariff barriers in Vietnam 14

3.4 Policy implications learned from China 16

III Conclusion 18

This report give a concrete and detailed view about international trade barriers According tothe term of international economic, we have researched the definition, characteristics of Tradebarriers and why it is used And more specifically, we have discussed about the Trade barriers

in China to clearly understand how trade barriers have affected the economy

Trade is an integral part of the total developmental effort and national growth of alleconomies It particularly plays a central role in the development plan where foreign exchangescarcity constitutes a critical bottleneck International trade is a factor and a product of theeconomic development of nations and also well known as “engine of growth” Internationaltrade increases the number of goods that domestic consumers can choose from, decreases thecost of those goods through increased competition, and allows domestic industries to ship theirproducts abroad

In this paper, we will particularly discuss about international trade barriers and its case study

of Trade barriers in China We all know that international trade benefits all countries even theone that is less efficient than the others However, economists generally agree that tradebarriers are detrimental and decrease overall economic efficiency; this can be explained by thetheory of comparative advantage Most trade barriers work on the same principle: theimposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price

or availability of the traded products If two or more nations repeatedly use trade barriersagainst each other, then a trade war results Barriers take the form of tariffs (which impose afinancial burden on imports) and non-tariff barriers to trade (which uses other overt and covertmeans to restrict imports and occasionally exports)

I INTRODUCTION

1 Objective of the study

This paper has been prepared from the corner of some objectives as follows:

 To give a concrete idea about International Trade Barriers and how it impacts on thetrade

 To know the various terms of barriers and protectionism

 To know the impact of barriers in the countries

 To have a more specific view about the current trade war between US and China

2 Limitation of the study

Although the study has reached its aims, there were some unavoidable limitations andshortcomings First of all, I am an amateur researcher who is not even expert on the field ofstudy; therefore, it was a tough task to assess the objectives perfectly within short time-limit

Secondly, all the data I used in this study is mostly self-reported that is limited by the fact that

it rarely can be independently verified

3 Methodology of the study

This study is generally a non-empirical analysis The main sources of this study includesecondary sources like textbooks, reports, relevant national and international legislations, casestudies, some important daily newspapers, online documents and some publications

II.FINDINGS OF THE STUDY

1 Theory of International trade barrier1.1 Definition

Definition: Trade barriers are government-induced restrictions on international trade, which

generally decrease overall economic efficiency

1.2 Characteristics:

Trade barriers cause a limited choice of products and, therefore, would force customers to payhigher prices and accept inferior quality Trade barriers generally favor rich countries becausethese countries tend to set international trade policies and standards Economists generallyagree that trade barriers are detrimental and decrease overall economic efficiency, which can

be explained by the theory of comparative advantage

1.3 Why trade barriers used?

 Protect infant Industries: trade barriers and restrictions tend to protect young and

undeveloped industries that are not large enough to completive with more mature foreignmarkets and products With governments help these industries have not been grown enoughare given a chance to create recognition , a brand name and develop grove in a healthyeconomical environment With Trade barriers young industries will be protected from foreigncompetition while they are developing

 Domestic Employment: Another major reason of trade barriers is protection of domestic

employment By putting the trade barriers in front of the imported products governments arepromoting domestic produced product or services While demand on domestic productsincreases the domestic production and domestic employment increases along

 Unfair Trade: In some cases foreign products may be sold in the domestic economy at a price

actually below of its actual cost as a result of foreign governments subsidize their producers

With This practice of dumping foreign products may take over the domestic market and giveless change to domestic products compete That will allow increase of foreign products in thedomestic market

 National Security : trade barriers also needed for protection of industries and companies

those produce important products to the defense and security of the nations The aim is toprevent the country from depending on these vital products or services to another nation

Trade barriers prevent foreign producers from unfairly gaining a competitive advantage in thedomestic economy and help to level the playing field If it will be used fairly by thegovernments they could be great tools for international trade and control the trade deficit of acountry

 Retaliation: Countries may also set tariffs as a retaliation technique if they think that a trading

partner has not played by the rules For example, if France believes that the United States hasallowed its wine producers to call its domestically produced sparkling wines "Champagne" (aname specific to the Champagne region of France) for too long, it may levy a tariff onimported meat from the United States If the U.S agrees to crack down on the improperlabeling, France is likely to stop its retaliation Retaliation can also be employed if a tradingpartner goes against the government's foreign policy object

1.4 Types of Trade Barriers

to the economy as a whole through the inefficient allocation of resources to the importcompeting domestic industry Therefore, since 1948, when average tariffs on manufacturedgoods exceeded 30 percent in most developed economies, those economies have sought toreduce tariffs on manufactured goods through several rounds of negotiations under the GeneralAgreement on Tariffs Trade (GATT) A tariff-rate quota (TRQ) combines the idea of a tariffwith that of a quota The typical TRQ will set a low tariff for imports of a fixed quantity and ahigher tariff for any imports that exceed that initial quantity In a legal sense and at the WTO,

countries are allowed to combine the use of two tariffs in the form of a TRQ, even when theyhave agreed not to use strict import quotas In the United States, important TRQ schedules areset for beef, sugar, peanuts, and many dairy products In each case, the initial tariff rate is quitelow, but the over-quota tariff is prohibitive or close to prohibitive for most normal trade.

Explicit import quotas used to be quite common in agricultural trade They allowedgovernments to strictly limit the amount of imports of a commodity and thus to plan on aparticular import quantity in setting domestic commodity programs Another common non-tariff barrier (NTB) was the so-called “voluntary export restraint” (VER) under whichexporting countries would agree to limit shipments of a commodity to the importing country,although often only under threat of some even more restrictive or onerous activity In somecases, exporters were willing to comply with a VER because they were able to captureeconomic benefits through higher prices for their exports in the exporting country’s market

There are several types of tariffs:

 Other tariff barriers:

Specific duty: It is based on (specific attribute) physical characteristics of goods It is a fixed

or specific amount of money that is levied as tax keeping in view the weight (quantity)/

measurement (volume) of the commodity

Ad valorem duty: These are duties that are imposed according to the value of commoditiestraded between countries It is generally a fixed percentage of the invoice value of the goodstraded

Compound duty: It is a combination of specific duty and ad valorem duty on a single product.

It is partly based on quantity and partly on the value of goods

1.4.2 Non-tariff barriers  Non-tariff barriers to trade includes: 

 Administrative and bureaucratic delays at the border

Among the methods of non-tariff regulation should be mentioned administrative andbureaucratic delays at the border, which increase uncertainty and the cost of maintaininginventory For example, even though Turkey is in a (partial) customs union with the EU,transport of Turkish goods to the European Union is subject to extensive administrativeoverheads that Turkey estimates cost it three billion euros a year

 Embargoes

Embargoes are outright prohibition of trade in certain commodities As well as quotas,embargoes may be imposed on imports or exports of particular goods in respect of certaingoods supplied to or from specific countries, or in respect of all goods shipped to certaincountries Although an embargo may be imposed for phytosanitary reasons, more often thereasons are political (see economic sanctions and international sanctions) Embargoes aregenerally considered legal barriers to trade, not to be confused with blockades, which are oftenconsidered to be acts of war

 Foreign exchange restrictions and foreign exchange controls

Foreign exchange restrictions and foreign exchange controls occupy an important place amongthe non-tariff regulatory instruments of foreign economic activity Foreign exchangerestrictions constitute the management of transactions between national and foreign operators,either by limiting the supply of foreign currency (to restrict imports) or by state manipulation

of exchange rates (to boost exports and limit imports)

 Import deposits

Another example of foreign trade regulations is import deposits Import deposits is a form ofdeposit, which the importer must pay the central bank for a definite period of time (non-interest bearing deposit) in an amount equal to all or part of the cost of imported goods

 Administrative regulation of capital movements

At the national level, administrative regulation of capital movements between states is carriedout mainly within a framework of bilateral agreements, which include a clear definition of thelegal regime, the procedure for the admission of investments and investors It is determined bymode (fair and equitable, national, 'most favored nation'), order of nationalization andcompensation, transfer profits and capital repatriation and dispute resolution.

 Licenses

The most common instruments of direct regulation of imports (and sometimes export) arelicenses and quotas Almost all industrialized countries apply these non-tariff methods Thelicense system requires that a state (through specially authorized office) issues permits forforeign trade transactions of import and export commodities included in the lists of licensedmerchandises Product licensing can take many forms and procedures The main types oflicenses are general license that permits unrestricted importation or exportation of goodsincluded in the lists for a certain period of time; and one-time license for a certain productimporter (exporter) to import (or export) One-time license indicates a quantity of goods, itscost, its country of origin (or destination), and in some cases also customs point through whichimport (or export) of goods should be carried out The use of licensing systems as aninstrument for foreign trade regulation is based on a number of international level standardsagreements In particular, these agreements include some provisions of the General Agreement

on Tariffs and Trade (GATT) / World Trade Organization (WTO) such as the Agreement onImport Licensing Procedures

 Localization requirement

An importing country may require the prospective exporter to include a degree of localparticipation in the product or service Options include a designated importer, a joint-venturecompany with majority local control, requirement for complete local manufacture which mayimply transfer of intellectual property The WTO has not reached a conclusion on thelegitimacy of these measures.[7]

 Standards

Standards take a special place among non-tariff barriers Countries usually impose standards

on classification, labelling and testing of products to ensure that domestic products meetdomestic standards, but also to restrict sales of products of foreign manufacture unless they

meet or exceed these same standards These standards are sometimes entered to protect thesafety and health of local populations and the natural environment.

 Quotas

Licensing of foreign trade is closely related to quantitative restrictions – quotas – on importsand exports of certain goods A quota is a limitation in value or in physical terms, imposed onimport and export of certain goods for a certain period of time This category includes globalquotas with respect to specific countries, seasonal quotas, and so-called "voluntary exportrestraints" Quantitative controls on foreign trade transactions are carried out through one-timelicense

Quantitative restrictions on imports and exports are direct administrative forms of governmentregulation of foreign trade Licenses and quotas limit the independence of enterprises with aregard to entering foreign markets, narrowing the range of countries in which firms canconduct trade for certain commodities They regulate the range and number of goods permittedfor import and export

However, the system of licensing and quota imports and exports, establishing firm controlover foreign trade in certain goods, in many cases turns out to be more flexible and effectivethan economic instruments of foreign trade regulation This can be explained by the fact thatlicensing and quota systems are an important instrument of trade regulation of the vastmajority of the world

This type of trade barrier normally leads to increased costs and limited selection of goods forconsumers and higher import prices for companies Import quotas can be unilateral, levied bythe country without negotiations with exporting country; or bilateral or multilateral, when theyare imposed after negotiations and agreements

An export quota is a limit on the amount of goods that can be exported from a country Thereare different reasons for imposing export quotas from a country These reasons includeguaranteeing of the supply of the products that are in shortage in the domestic market,manipulation of the prices on the international level, and the control of goods strategicallyimportant for the country In some cases, the importing countries request exporting countries

to impose voluntary export restraints