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Assignment number 1+++
Task: Research restrictions on international business trade between the United States and a country of your choice. The outline provided (see below) will be helpful in preparing for your research.
1) one example of a country that we have a tariff
2) an example of another country where we use nontariff barriers in our international business relations.
In your answer be sure to list the country you researched and describe the type of trade restriction exist between the United States and county/policy you select.
This is not an essay, instead you are listing the restriction, company and describing the policy in 1-2 paragraphs.
RESTRICTIONS TO INTERNATIONAL BUSINESS.
Specialization and international trade can result in the efficient production of want-satisfying goods and services on a worldwide basis. Yet, the nations of the world continue to erect barriers to free trade.
Types of Trade Restrictions
1. Tariffs. Perhaps the most commonly applied trade restriction is the customs (or import) duty.
a) An import duty (or tariff) is a tax that is levied on a particular foreign product entering a country. This tax has the effect of raising the price of the product in the importing nation.
(1) Revenue tariffs are imposed to generate income for the government.
(2) Protective tariffs are imposed to protect domestic industry from foreign competition.
- b) Dumping is the exportation of large quantities of a product at a price lower than that of the same product in the home market. Thus, dumping drives down the price of the domestic item.
- Nontariff Barriers. A nontariff barrier is a nontax measure imposed by a government to favor domestic over foreign suppliers. Types of nontariff barriers are as follows:
- An import quota is a limit on the amount of a particular good that may be imported into a country during a given period of time.
- An embargo is a complete halt to trading with a particular nation or in a particular product. The embargo is used most often as a political weapon.
- A foreign-exchange control is a restriction on the amount of a particular foreign currency that can be purchased or sold. This has the effect of limiting imports from the country whose foreign exchange is being controlled.
- Currency devaluation is the reduction of the value of a nation’s currency relative to the currencies of other countries. Devaluation increases the cost of foreign goods, while it decreases the cost of domestic goods to foreign firms.
- e) Bureaucratic red tape such as product testing and labeling can be one of the most frustrating trade barriers of all.
- Cultural Barriers. Cultural barriers can impede acceptance of products in foreign countries. When customers are unfamiliar with particular products from another country, their perceptions about the country might affect their attitude toward the products and help to determine whether they will buy them
Reasons for Trade Restrictions. Reasons for restricting trade include the following:
1. To equalize a nation’s balance of payments
2. To protect new or weak industries
3. To protect national security
4. To protect the health of citizens
5. To retaliate for another nation’s trade restrictions
6. To protect domestic jobs (however, protecting these jobs can be expensive)
Reasons against Trade Restrictions. Trade restrictions have immediate and long-term economic consequences—both within the restricting nation and in world trade patterns. These include the following:
1. Higher prices for consumers
2. Restriction of consumers’ choices
3. Misallocation of international resources
4. Loss of jobs
Assignment number 2++++
Purpose: To develop an understanding of forms of small businesses.
Instructions: You are serving as an advisor to the Smith family.
The Smith family has a very successful family tea shop that also provides wireless Internet access and live entertainment. They believe that there is a great deal of growth opportunity in such tea shops and plan to eventually expand. After meeting with their lawyers and accountants, they realize they need to change their business structure to either a corporation or a limited-liability company. They understand that both have limited personal liability.
Using the information in your text regarding the advantages and disadvantages of each, make a recommendation as to which you would recommend to the Smith family.
You must prepare a formal one-page letter to the Smith’s informing them of your recommendations.
Be sure to include the following sections in your memo.
- Explanation of a Corporation or LLC and the benefits (See Chapter 4)
- A strong recommendation for the formation of either a Corporation or LLC
- The rationale for our recommendation of either a Corporation or LLC
- You also want to make the business structure of a corporation or a limited-liability company easy to understand. You decide to refer them the California Secretary of State website Link. (Links to an external site.) This should be included with your 1-page letter.