Trade barriers in international business

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Trade Barriers in IB

Standards

EXAMPLE: In a restaurant business, the owner gives the staff a set of rules/standards they must meet. This could boost their business.

DEFINITION: An agreement between businesses with a set of rules for in doing something such as making a product, supplying the materials, managing the process,etc.

Landed cost

DEFINITION: Is the official cost for an imported product. This determines whether a foreign purchase is a better deal than a domestic purchase. It is the purchase price + all shipping costs.

EXAMPLE: To get specialty paper from New Zealand, it costs 20.00 per 5000 sheets. These sheets will be exported to Wales and the importation tariff is 5%. All of these costs will give them the the landed cost.

Excise Taxes

DEFINITION: tax paid on the manufacture,sale or consumption of a particular product within a country.

EXAMPLE: Alcohol and cigarettes are known to harm a persons health, so excise taxes are put on these products to reduce the consumption of these goods.

Currency fluctuations

EXAMPLE : For example, assume you are a U.S. exporter who sold a million widgets at $10 each to a buyer in Europe two years ago, when the exchange rate was €1=$1.25. The cost to your European buyer was therefore €8 per widget. Your buyer is now negotiating a better price for a large order, and because the dollar has declined to 1.35 per euro, you can afford to give the buyer a price break while still clearing at least $10 per widget.

DEFINITION: is a change in an exchange rate. It is a natural outcome of the exchange rate system.

Embargoes

EXAMPLE: In 2017, Canada imposed a trading ban on Venezuela due to a human rights violation during a violent protest in Venezuela.

DEFINITION: A trading/commercial ban with a certain country.

Subsidies

EXAMPLE: The agricultural industry is helped by the Canadian government or Canadian agricultural programs that specify in subsidies. This helps farmers with their business.

DEFINITION: subsidies is money loaned from the government to certain industries to help them with costs and as well to keep prices for consumers lower.

Tarrifs

EXAMPLE: President Donald Trump imposed a 25% tariff on steel and 10% tax on on aluminium. This tariff will raise the costs for the steel users such as automakers. This will then increase the price for consumers.

DEFINITION: Tariffs are taxes or duties paid on certain types of imports.