Note:

Reducing ITCs carbon footprint is one of the goals of

ITCs E-Learning Programme.
Before printing this document, please make sure that
you really require it on paper.

Lecture 2 - Trade Policy Instruments

1.2 Introduction

1.3 Which area of an exporters' business is affected by trade policies?

(Multiple Choice, 10 points, 1 attempt permitted)

Correct Choice
 Importing raw materials

Entering export markets

Complying with product standards

Transporting goods to market

X All of the above

Feedback:

Trade Policy is important across all stages of the production process and value chain.

1.4 Ask the expert: Video

www.youtube.com/embed/eDC_2zCa9oI?rel=0
1.5 Why do we look at trade policy across the value chain?

1.6 The value chain

1.7 Business costs throughout the value chain
1.8 Trade policy instruments along the value chain
1.9 Tariffs
1.10 Rules of origin

1.11 Ask the expert: Video

www.youtube.com/embed/0qFZLn9JQQU?rel=0
1.12 Effects of EU and US rules of origin on African textile and clothing exports

1.13 Which of the following statements about rules of origin and market access are true?

Correct Choice

X Even when tariff rates are the same into two different export markets, rules of
 origin can have a significant impact on the ability of enterprises to export.

X More stringent rules of origin do not merely raise compliance costs for exporters.
In some cases, they may hamper their ability to export altogether.

X When deciding where to export, enterprises should take into account the rules of
origin which apply in foreign markets.

X Different countries and exporters will be affected in different ways by a change in

rules of origin.

Feedback:

Even though both the EU and the US have high rates of use in their respective preferential market access, the EU's
particular "double transformation" requirements makes it a less attractive export market for textiles producers in
developing countries. This highlights the importance of rules of origin for enterprises, as well as the reasons for which it
is in the interest of enterprises to demonstrate an interest in rules of origin and tariff rates when their governments are
negotiating free trade agreements.

1.14 Competition Policy

1.15 Ask the expert: Video

www.youtube.com/embed/oFKSYgm3_bE?rel=0

1.16 The liberalisation of the transport market (1)

1.17 The liberalisation of the transport market (2)

1.18 Ask the expert: Video

www.youtube.com/embed/AU3pYN5EiGA?rel=0
1.19 Jamaica - stopping abuse of dominance in port management
1.20 True or false?
1.21 Foreign Direct Investment (FDI) openness

1.22 India: business service outsourcing creates value

1.23 Answer the question

Correct Choice

MNEs conducted market-seeking FDI and Indian enterprises, including SMEs ,

obtained links to global value chains.

MNEs conducted resource-seeking FDI and Indian enterprises, including SMEs,

 obtained a competitive business and market environment.

X MNEs conducted efficiency-seeking FDI and Indian enterprises, including SMEs,

obtained technology and know-how.

X MNEs conducted market strategic asset-seeking FDI and Indian enterprises,

including SMEs, obtained a link to global value chains.

MNEs conducted resource-seeking FDI and Indian enterprises, including SMEs,

obtained preferential treatment by importing countries.

Feedback:

In the previous case study, MNEs conducted efficiency-seeking FDI by outsourcing certain tasks to India where costs
(especially labour costs) were low, and skills and infrastructure sufficiently good. At the same time, it can also be said
that MNEs made market strategic asset-seeking FDI, because they launched joint ventures or subsidiaries in order to
reach human capital of partner enterprises. Indian enterprises,including SMEs, gained a link to global value chains by
becoming able to export their goods and services to global markets via MNEs, as well as technology and know-how by
receiving training.
1.24 Trade facilitation

1.25 Ask the expert: Video

www.youtube.com/embed/4Eb5ioChfn0?rel=0
1.26 Delaying trade procedures damages SME competitiveness and export opportunities

1.27 Answer the question

Correct Choice

Bedi's products were too expensive because of the excessive cost of the inputs
 which it used to make school items.

X The school items made by Bedi Limited could not be delivered by the time
promised, due to problems at the port linked to poor quality in trade facilitation.

Tesco decided to purchase from another company which produced higher quality
clothes.

X In order to become part of Tesco's value chains, the production and delivery of
Bedi's products was time sensitive.

Bedi Limited could not find financing for its production.

Feedback:

Bedi Limited failed to deliver its school items to the US because of a delay at the port. In order to improve trade
facilitation, not only customs, but also other agencies and service providers need to enhance their performance. Goods
are finally cleared by customs, but only after clearances from other border agencies have been obtained. Agencies
responsible for quality standards make separate inspections and may take samples to ensure imports conform to local
quality standards. This process often delays release and can add considerable costs to imports due to delays, de-stuffing
fees and demurrage, among other issues.
1.28 Answer the question

This exercise is not available in a static file.

1.29 Key points

1.30 Thank you for completing the lecture