Essay
Unit 39 M1
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Essay of 3 pages for the course Unit 39 - International Business at PEARSON (Unit 39 M1)
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IntroductionIn this task I am going to assess the methods of promoting and restricting international trade.
I will also explain how and why they may be used.
International trade refers to the process of exchanging capital, goods and services across
international borders.
The purpose of international trade is to allow a country or certain nations to specialise. This
would allow companies to produce products at lower prices and they are usually of a good
quality. For example, China produces a great number of goods that the United States
consumes. They are able to mass-produce these products better than the United States will.
It’s important to regulate international trade because there are certain barriers and levels
which the trade can process through. Furthermore countries will need to obey different
market areas trade laws and to regulate the policy to make sure that the products which is
being imported or exported is up to the standard of agreement through the law. For example
in the UK, if you are going to export firearms, you will need a license which makes you
authorized to do so. Export of military goods requires an export licence issued by the
Department for Business, Innovation and Skills (BIS).
Tariffs
A tariff is a tax or duty that raises the price of imported products and causes a contraction in
domestic demand and an expansion in domestic supply. For example, until recently, Mexico
imposed a 150% tariff on Brazilian chicken. The United States has an 11% import tariff on
imports of bicycles from the UK. This sort of mechanism has a great effect on the UK
because the tariff can either increase or decrease depending on the demand of the product.
UK is known for manufacturing and technology goods and the demand for that is high,
therefore the tariff will also be high which involves in higher tax pay out to the governments.
This does have an effect on Pizza Hut because, they’re an international business and many of
their branches across the world source their products from the USA, therefore this will
increase the trade for supplies, thus this will increase the tariffs for Pizza Hut.
Quota
Quota is produced by the government which is enforced and imposed to restrict the limits for
the quantity of goods and services which can be imported or exported. Quotas are useful in an
international trade to enable the regulation of the quantity of trades between countries. These
are quantitative (volume) limits on the level of imports allowed or a limit to the value of
imports permitted into a country in a given time period. Until 2014, South Korea maintained
strict quotas on imported rice. It has now replaced an annual import quota with import tariffs
designed to protect South Korean rice farmers. Quotas do not normally bring in any tax
revenue for the government. This will have an effect on Pizza Hut because the quote will
restrict mass produced products into a certain country, therefore Pizza Hut will have to find
an alternative option to import products or make a negotiation with the government in
importing bulk goods internationally to the other branches worldwide.
European Union
1
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