new notes for fiscal, international trade policy 2

8/3/2019 New Notes for Fiscal, International Trade Policy 2

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MONETARY, FISCAL, and INTERNATIONAL TRADE POLICYWith Taxation and Agrarian Reform

MONETARY POLICY

Money is a very important means used in the

conduct of economic activities. The primaryconcern of the government is to maintain astrong and growing economy.

The Significance of MoneyBefore money was invented, barter was themethod used in exchanging a good with anothergood. Under the barter system, the familyproduces the various goods it needs.Barter was not successful because:

1. The goods offered for barter may notbe the ones desired.

2. The parties may find it hard to agreeon what quantity of goods to be offered inexchange that will approximate the value of thedesired good.

The introduction of money eliminated thedisadvantages of the barter system. Withmoney, the exchange of goods became faster,and as a result, the people were provided withthe right environment to specialize.The Disadvantage of Using Objects as

Money1. Objects are perishable.2. Objects are indivisible.3.Objects are not easily portable.

MONEY* Is anything that is generally accepted aspayment for goods and services. (Hyman)* Anything used to make payment, for a good, a

service or a debt obligation. (Cargill)* A generally acceptable medium of exchange.(Kidwell and Peterson)

Money SupplyIs a vehicle of economic activities when incirculation. It consists of the following:1. Coins and Bills in circulation2. Demand Deposits in Banks3. Quasi-Money (Savings Deposits, TimeDeposits)4. Deposit Substitutes (deposits in savingsbanks, savings and loans associations, andcredit unions)

Sources of Money Supply1. Lending operations of the banking systemdetermines the volume of money checks a bankcreates.2. Foreign currency inflows (mostly dollars) aresold to the Central Bank for pesos throughcommercial banks based on a fixed exchangerate prescribed by the Central Bank.3. Taxes also change the level of money supplyas leakages from the circular flow. These are

foregone conclusions and savings which couldotherwise be part of currency in circulation andreserves which enable banks to create money

checks.4. The government prints money for circulationwhen there a depression in the economy.

Money serves the following functions:

1. as a unit of account when peopleused engage in barter, the exercise wasnot always easy to execute. With thecoming in of money as the basic meansof trade, people were able to determinethe relative worth or value of the goods

being traded.

2. as a medium of exchange with theuse money, exchange can take placeeven if there are no coincidences ofwants. As exchanges are facilitated withthe use of money, trade expansion isexpected.

3. as a store of wealth the use of moneygives the person the luxury of time.

Electronic Money: A New Form of MoneyMoney evolves as the requirement for its usebecome more sophisticated. Advances intechnology in technology made possible theintroduction of newer forms of money.The first to be developed is electronic moneywhich simply means money storedelectronically, and which is also known as E-Money.Electronic money comes in four forms: (1) debitcards, (2) stored value cards, (3) electroniccash, and (4) electronic checks.

The Goals of Monetary Policy1. High employment the resources of themonetary authorities can be channeled towardthe creation of more jobs. The financial systemcan give liberal financing terms to labor-intensive companies.2. Economic growth refers to the steadyprocess of increasing productive capacity of theeconomy, and hence of increasing nationalincome.3. Stable prices When prices of commodities

rise, they bring uncertainty in the economy, andeconomic growth is placed at a standstill.4. Interest Rate Stability - This is a desirablefeature of a growing economy. When interestrates fluctuate, they create uncertainty amongdecision-makers, and these people find It hardto decide on which move to make.5. Stability of financial markets One of theimportant goals is the promotion of a more


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stable financial system in which financial crisesare avoided.6. Stability in Foreign Exchange Markets When the value of the peso goes down inrelation to other currencies, the prices ofcommodities tend to increase. Conversely,when the value of the peso rises against foreigncurrencies, the prices of commodities tend to godown.

BANKO SENTRAL NG PILIPINAS- The BSP is the countrys central monetaryauthority. It was established on July 3, 1993 byvirtue of Sec.2 RA 7653, better known as TheNew Central Bank Act.- It has an authorized capitalization of P50 billionpesos.- The BSP took over from the Central Bank ofthe Philippines which was established onJanuary 2, 1949.

As an OrganizationThe Monetary Board is the policymaking body ofthe Bank. It formulates and reviews monetaryand banking policies. Its chairman is the BSPGovernor, with 5 full-time members from theprivate sector and one member from theCabinet.A deputy governor heads each of the Banksthree major operating sectors, that includes 44departments and offices, 18 of which are officesand branches in the region.

3 Sectors of BSP1. Banking Services Sector serves thebanking needs of all banks such as acceptingtheir deposits, servicing their withdrawals andextending them credit through the rediscountingfacility.2.Supervision and Examination Sector enforces and monitors compliance to bankinglaws to promote a sound and healthy bankingsystem.3. Resource and Management Sector serves

the human, financial and physical resourceneeds of the BSP.

ROLES of BSP1. The Supplier of Money Only BSP canissue the Philippine currency, the peso. Thepaper notes and coins we use in our economictransactions are fully guaranteed by thegovernment.2. A Money Manager The BSP sees to it thatthere is just enough money to meet the financialneeds of the economy.

3. The Supervisor of All Banks The BSPregularly monitors and examines the operationsof banks, as well as their compliance withbanking rules and regulations.4. The Bank of Banks The BSP does not dealdirectly with the public. It can only acceptdeposits from, and grant loans to, banks.5. The Main Bank of the Government TheBSP is the official depository of the government.Some of the tax collections, proceeds of the sale

of government securities and foreign loans aredeposited with the BSP. Likewise, when thegovernment needs to repay its foreign debts ordisburse money to pay expenses, it withdrawsits funds from the BSP.

Amando Tetangco Jr. - BSP Governor andChairman, Monetary Board

THE GOVERNMENT, FISCAL POLICYAND TAXATION

Definition of terms:

INVESTMENT - an amount of money invested insomething for the purpose of making a profit.

EXPENDITURE - - an amount of money spent,as a whole or on a particular thing

FISCAL POLICY

- Takes off to influence income andconsumption and lead the economy towardgrowth and development where monetary policyleft off.

- As a tool utilizes government spendingand taxation as means to control the economy.- Cannot be easily manipulated; goes hand inhand with monetary policy.

GOVERNMENT

- Very important sector of the economy- Makes up for the private sectorsdeficiency.- Big spender and big borrower

Sources and Uses of Public FundsTAXES - biggest source of government funds.

2 Tax Collecting Agencies:*Bureau of Internal Revenue*Bureau of Customs

a. Taxes collected includes:*Income taxes of individuals & businesses*Property taxes*Import taxes*Inheritance taxes*Gift taxes*And other specific taxesb. Non-Tax Revenues

- Governments also earns income from.Ex. Collection of fines and feesLicenses and registration chargesProfits earned by government-operated and

controlled corporations (GOCC)

Borrowing- Government resorts to when revenues areinsufficient to finance growing budget.

Public Debt- Consist of all claims against our governmentwhich may have resulted from loans oradvances extended to the government or as


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payment for goods and services rendered to it,for which the existence of indebtedness hasbeen acknowledged by the government.

A government tends to borrow for 3 reasons:

1. Due to political reluctance to raise taxes2. A sense that some government sponsoredcapital improvements should be paid forgradually over the life of the investment by thosewho will be taxpayers while the improvementsare providing benefits.3. A deliberate use of the budget to stimulate theeconomy

Government borrowing may be undertaken frominternal sources such as the Central Bank, orfrom external sources such as foreigngovernments.

Government Expenditures

- occupies the top position among thevarious government expenses.

- Consists of spending connected with themaintenance of the different governmentsubdivisions and instrumentalities

Ex. Salaries of government officials andemployees.

2 Types of Budget1. Deficit Budget

- Is being adopted by the government ininstances where the private sector is hesitant tospend and the economy needs a boost- Has an expansionary effect since it increasesthe flow of money into the economy as a resultof an increase in government spending, theexcess spending being derived from sourcesother than taxes.

2. Surplus Budget

- Is being adopted by the government attimes when private spending is excessive and

threatens to be inflationary.- Has a contracting effect since not all thetaxes collected from the people are channeledback into the economic stream.

- Depress economy

Increasing Aggregate Demand- The effect when there is an increase ingovernment purchases or cutting tax rates.

Decrease Aggregate Demand

- The effect when there is reducedgovernment demand or increasing tax rates.

*A change in the tax rates or in governmentspending is purely discretionary.

Effects of Budget:

- A deficit and balanced budget have anexpansionary effect because they increase the

flow of money into the economy as a result ofincrease in government spending. Such excessspending are being derived from publicborrowing other than taxes.

- Income spent by the government arederived from tax collections. So the excessamount spent are derived from public borrowing.

- The surplus budget has a contracting effectsince not all tax collections are spent andchanneled back into the economy.

TAXATIONThe act of collecting taxes. This power is vestedin the government, whether local or national.

TAXES are compulsory payments associatedwith income, consumption, or holding of propertythat individuals and corporations are required tomake each year to governments.

THE NEED FOR TAXATION1. As funds to maintain the various functions ofthe government, and the different activities itdeems important.2. To sustain viability of the government inproviding the necessary services for the people.

REQUISITES OF A VALID TAXATION1. The tax should be for a public purpose ifthe funds generated through it is used to supportthe government, like when it is used to pay for

the construction of public buildings.2. The rule of taxation shall be uniform alltaxable articles or kinds of property belonging tothe same class or category are taxed at thesame rate.3. The person or property taxed shall bewithin the jurisdiction of the governmentlevying (imposing) the tax when the statecollects taxes on persons, properties, ortransactions where it has jurisdiction.4. The assessment and collection of certainkinds of taxes must provide guaranteesagainst injustices to individuals if there issufficient notice and opportunity for hearing isprovided to individual subjects of taxation.

OBJECTIVES OF TAXATION1. to raise funds taxation is the chief meansfor raising funds to support the government2. to redistribute wealth some individualsamass great wealth during their lifetime, andtaxation is one way of redistributing these wealthto the people. Examples are taxes relating toestate and inheritance.3. to regulate consumption consumption ofsome goods sometimes reach level that becomeharmful to the society, so to limit the sale ofthese goods, taxes are imposed.4. to protect local industries imported goodssometimes enter our local markets to thedetriment (harm, disadvantage) of localproducers. If imported goods are sold locally atlower process, the government may imposetaxes that will raise its selling price, and in effect,


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imported goods will be less attractive todomestic consumers.

CLASSES OF TAXESa.According to Subject personal, property,or excise

Personal tax one imposed onindividuals residing within a specific territory,regardless of property or occupation. Example:Community tax levied by the barangay to itsresidents.

Property tax one levied on propertyExcise tax one imposed upon goods

consumed, sold, or manufactured within anation. Example: excise tax levied on alcoholand cigarettesb. According to purpose revenue orregulatory

Revenue tax is imposed to collectrevenues for the general purposes of thegovernment. Example:income tax and sales tax.

Regulatory tax is imposed for aspecial purpose like the protection of localindustries from foreign competition.c. According to Authority Imposing Tax national and local taxes

National tax one imposed bythe national government. Example: incometaxes and customs duties

Local tax one levied in themunicipal, provincial, or barangay governments.

Example: real property taxd.According to Determination of Amountspecific or ad valorem

Specific tax one assessed onthe basis of a tax per unit.

Ad valorem assessment isbased on a percentage of the value of the iteme.According to Who Bears the Burden director indirect

Direct when the person on whom thetax is imposed absorbs the burden.Example: income tax

Indirect when the amount is paid bythe person other than the one whom it is legallyimposed. Example: VAT paid by the seller butpassed on to the buyer of the selling price.f. According to Graduation Rate proportional, progressive or regressive

Proportional if it is based on a fixedpercentage of the amount of property, income,or other factors. Examples: sales tax and realproperty tax

Progressive when the rate increasesas the tax base increases. Example: income tax

Regressive when the effective ratedecreases as the tax base increases.

REQUISITES FOR AN IDEAL TAX SYSTEM1. Adequate adequate to raise money

to support the activities of the government2. Equitable tax system must be fair.

It must not benefit some groups or individual atthe expense of others.

3. Economically efficient a taxsystem must be able to support strong, stableeconomic growth, rather than becoming animpediment (hindrance) to investment and abarrier to economic development.

4. Simple

TAX ON INDIVIDUALS

Individuals, as income taxpayers, fall intotwo general categories of citizens and aliens. Acitizen may be a resident citizen or a non-resident citizen. Alien individuals are classifiedinto resident aliens, and non-resident aliens arein turn classified into those engaged in trade orbusiness or practice of profession, in thePhilippines and those not engaged in trade orbusiness, or practice of profession, in thePhilippines.

An individual is a citizen of thePhilippines by definition of the Constitution of thePhilippines. Under the Constitution, anindividual may be a citizen of the Philippines atbirth (i.e. one whose father or mother is a citizenof the Philippines), or may become a citizen ofthe Philippines sometime after birth (i.e. onewho is naturalized in accordance with law).Philippine citizenship may be lost or required inthe manner provided by law.

Who is a non-resident citizen? He is acitizen who:

a. establishes to the satisfaction of theCommissioner of Internal Revenue the fact ofhis physical presence abroad with a definiteintention to reside therein; or

b. leaves the Philippines during thetaxable

year to reside abroad;as an immigrant; orfor employment on a permanent basis; or

3. for work and derives incomefrom abroad and whose employmentthereat requires him to be physically

abroad most of the time during thetaxable year; or

c. was previously a non-resident citizenand who arrives in the Philippines at any timeduring the taxable year to reside permanently inthe Philippines. He shall be considered a non-resident citizen for the taxable year in which hearrives in the Philippines with respect to hisincome derived from sources abroad until thedate of his arrival in the Philippines.

A citizen of the Philippines who shall have

stayed outside the Philippines for 183 daysor more by the end of the year is a non-resident citizen for the year.

PERSONAL EXEMPTIONS OF CITIZENS ANDRESIDENT ALIENS

a. Married person:If only one spouse is deriving taxable income,only said spouse may claim the personal


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exemption. If a married person is not legallyseparated from his spouse, his basic personalexemption is P32,000. If legally separated fromthe spouse, without any dependent, his basicpersonal exemption is P20,000. If legallyseparated from the spouse with a dependent, hemay qualify as head of the family, with a basicpersonal exemption of P25,000 and with anadditional exemption of P8,000, if the dependentis a child.

b. Head of the Family:Under the National Internal Revenue

Code, the term head of the family means anunmarried or legally separated man or womanwith one or both parents, or both parents, or withone or more brothers or sisters, or with one ormore legitimate, recognized natural or legallyadopted children, living with and dependentupon him or her for their chief support, wheresuch brothers, sisters or children are not morethan twenty-one years of age, unmarried, andnot gainfully employed, or where such brothers,sisters or children, regardless of age, areincapable of self-support because of mental orphysical defect.

The term chief support means more than one-half of the requirements for support. Thus, if twochildren contribute equal amounts for thesupport of a parent, neither one of them mayqualify as head of the family.

A parent, brother, or sister may qualify thetaxpayer as head of the family, entitled to thebasic personal exemption of P25,000, but notentitled to additional exemption.

c. DependentA dependent, for whom a head of family or amarried person may claim an additionalexemption of P8,000, is a legitimate, illegitimateor legally adopted child, chiefly dependent uponand living with the taxpayer, if such dependent is

not more than twenty-one years of age,unmarried and not gainfully employed, or if suchdependent, regardless of age, is incapable ofself-support because of mental or physicaldefect

d. Single individual, widow/widower or marriedindividual judicially decreed as legally separatedwith no qualified dependent has a basicpersonal exemption of P20,000.

* Marginal Income Earner refers to

individuals not deriving compensation as anemployee under an employer-employeerelationship but who are self-employed andderiving gross sales/receipts not exceedingP100,000 during any 12-month period. Theyshall file this return reflecting herein the netincome from business.

When to File

The Returns of the taxpayers shall be filed on orbefore the 15th day of April of each year coveringincome for the proceeding year.

Agrarian Reform Program

Events that paved the Way for AgrarianReform

Land one of the factors of production* When one wants to engage in

production, he must find some land, apply thenecessary materials and labor inputs, and waitfor the outputs to start pouring in, if he wants tobe of Service to the nation (and to himself).

* Securing land for production purposesconstitutes the BIGGEST barrier to economicgrowth.

* Prior to 1963, big land estates wereowned by a small % of the population.

* hacienderos - landlords madedecisions on what to do with their lands.

* 1946-50s rebellion of the poorpeasant farmers of Central Luzon.

- Rebellion, however is economicallydisruptive because the production ofgoods and services is hampered byhostile actions between the landlordsand the tenant-rebels.- Rebellion is the effect of concentration

of land ownership in the hands of a few. Thedispersal of land ownership has thereforebecome an important issue; even Gen. DouglasMac Arthur recognized land reform as animportant requisite for economic development.

THE COMPREHENSIVE AGRARIAN REFORMPROGRAM

- otherwise known as R.A. 6657- was signed by Pres. Corazon Aquino

on June 10, 1988- In its declaration of Principles and

Policies, the program stated that it is the policyof the state to pursue CARP.

- The welfare of the Landless Farmers

and Farm Workers will receive the Highestconsideration:

1. To promote Social Justice2. To move the nation toward Sound

Rural Development andIndustrialization

3. Establishment of OwnerCultivatorship of Economic-sizedfarms as a basis of Philippineagriculture.

* turning over 26, 000 hectares of farmland tosome 20, 000 Mindanao farmers. Farmlands-

formerly owned by MNCs were given to theworkers cooperatives of DOLE Phils., DelMonte and the National DevelopmentCorporation.

What is LAND REFORM?Limiting ownership of land by the

landlords.


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HISTORICAL BACKGROUND:

Land Reform has been with us forthousands of years.

Rome is acknowledged as one of theworlds greatest empires, but still its rulers foundit necessary to pass a law that limited theamount of land one person could hold.

But even with such a law, the aristocrats(or the patricians) gained control of public lands.This made it necessary for Tiberius and GaiusGracchus to secure new but short-lived laws forland reform during the 2nd century B.C.

During the middle ages, feudalismbecame the norm. the feudal lords owned thelands worked by the serfs who were providedwith food and protection. This arrangementmade the life of the serfs, and later of thetenants, miserable throughout the centuries andway up to the 1900s. The feudal lords were ableto own huge estates that became too large forefficiency.

The tenants relationship with the feudallord was not permanent, and profits derived fromtilling the land were not shared with the tenants.Because of this, the tenants were not motivatedto exert their utmost efforts to make the landsproductive. On the other hand, the landownerswere not also motivated to invest in the landsbecause they were not sure that the tenants willmake good use of them. As such, society waspressed for a solution that will make the lands

more productive. The problem, of course, washow to motivate the tillers of the soil.

By the 1800s, there were severalmeasures adapted in Europe and in the UnitedStates to make land reform a factor foreconomic growth.

In the community economy of prehistoricPhilippines, land ownership was not much of aproblem because unsettled land belonged tothe individual who planted it with coconut, fruittrees, and abaca. When a community settles ina place, the land is divided among its members.

Every family is, thus, provided with a plot of landto cultivate.

The coming of the Spaniards changedmany aspects of the economic life of the earlyinhabitants of the Philippines. The Spaniardsbrought with them the system of feudalism. Theconquerors divided among themselves allavailable lands, turning these into largeencomiendas. This condition continued for morethan three centuries of hardship for farmers whowere allowed to till the land of theencomenderos. These big landholdings were

later converted into haciendas.The end of the Spanish rule in the

Philippines also marked the beginning of someattempts at land reform. These are as follows:

1. the confiscation of friar lands byGeneral Emilio Aguinaldo during the Phil.Revolution of 1896;

2. the institution of systematic landregistration and public land

disposition during the Americanoccupation;

3. the social justice program of Pres.Quezon during the commonwealthperiod;

4. the land-for-the-landless program ofPres. Ramon Magsaysay during histerm; and

5. the land reform pilot projects duringthe administration of Pres. DiosdadoMacapagal. These attempts wereconsidered limited in scope, and forone reason or another, were not ableto improve the lot of the masses andeliminate feudalism.

A more radical measure was theenactment of Pres. Decree No. 27, otherwiseknown as the Tenants Emancipation Act. Thisdecree emancipated the tenants from thebondage of the soil, transferred to them theownership of the land they till and provided theinstruments and mechanisms to support itsobjectives.

CARP (Comprehensive Agrarian ReformProgram)

- this was a more ambitious meansof improving the life of manyFilipino

- it is embodied in theComprehensive Agrarian ReformLaw (R.A. no. 6657, approved

June 10, 1988)- this is an act that was instituted to

promote social justice andindustrialization, providing themechanism for its implementationand for other purposes.

The CARPs Program of Implementation

The three phases of implementation areas follows:PHASE 1 (1988-1992)

a. rice and corn lands covered by P.D.no. 27,

b. all idle or abandoned landsc. all private lands voluntarily offered by

owners for agrarian reform,d. all lands foreclosed by government

financial institutions,e. all lands acquired by the Presidential

Commission on Good Governance,f. Lands operated by multinational

companies, andg. All other lands owned by the

government devoted to or suitable foragricultural purposes

PHASE 2 (1988-1992)a. all alienable and disposable public

agricultural lands,b. all arable public agricultural lands

under agri-forest, pasture andagricultural leases already cultivatedand planted to crops in accordance


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with Sec. 6, Art, VIII, 1987Constitution

c. all public lands which are to beopened for new development andresettlement, and

d. all private agricultural lands in excessof fifty hectares

PHASE 3a. landholdings above twenty four

hectares up to fifty hectares (1992-1995)

b. landholdings with areas between 5.1and 24 hectares (1994-1998)

Coverage of the Program:1. Public Health Programs2. Family Planning3. Education and training of farmers4. Reorganization of land reform agencies5. application of labor laws to agriculturalworkers6. construction of infrastructure facilities asfeeder roads, irrigation system andestablishment of rural electrification7. organization of different types of voluntaryassociation8. providing employment opportunities9. other services of community development

Reasons for the Failure of the Program in theearly stages of Implementation1. Program stopped at land distribution.

2. The farmers were not prepared to take overthe responsibilities given them.

3. The haphazard planning on the part of thegovernment.

4. The tenants squatting on the land.

Not over P 10,000 5%

over P 10,000 but not over P 30,000 P 500 + 10% of the excess over P10,000

over P 30,000 but not over P 70,000 P 2,500 + 15% of the excess over P 30,000over P 70,000 but not over P 140,000 P 8,500 + 20% of the excess over P 70,000

over P 140,000 but not over P 250,000 P 22,500 + 25% of the excess over P

140,000over P 250,000 but not over P 500,000 P50,000 + 30% of the excess over P250,000

over P 500,000 P 125,000 + 34% of the excess over P500,000

Mr. Robert de CastroIndividual Income Tax Return

December 31, 2025

Gross Compensation Income P 375,000.00Less: Exemptions:a. Married 32,000

b. children 4x8000 32,000 64,000.00Taxable Income P 311,000.00

=========Tax Duea. Basic Rate 50,000.00b. Excess (311,000 250,000)61,000 x 30% 18,300.00

Tax Due 68,300.00Less: Tax withheld 68,300.00


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Tax refundable/payable -----0-----

* If the tax withheld is equal to the tax due.

Mr. Robert de CastroIndividual Income Tax Return

December 31, 2025

Gross Compensation Income P 375,000.00Less: Exemptions:a. Married 32,000b. children 4x8000 32,000 64,000.00

Taxable Income P 311,000.00========

Tax Duea. Basic Rate 50,000.00b. Excess (311,000 250,000)61,000 x 30% 18,300.00

Tax Due 68,300.00

Less: Tax withheld 110,000.00 Tax refundable (41,300.00)=======

* If the tax withheld is greater than the tax due, you have a refund

INTERNATIONAL TRADE

- The Phoenicians pioneered in theseagoing trade, followed later by theGreeks and the Romans.- Some Traders went as far as India and

China.- 13th century, Italian cities of Genoa, Pisaand Venice dominated international trade.- Period of discovery, feats of explorerslike Columbus and Magellan led to thefurther development in international tradeinvolving Spain, Portugal, France, andEngland. These nations became thecenters of trading influence around theworld.

Reasons for International trade:

GlobalizationExport and Import

Basis for International Trade:

a. Specialization

b. absolute advantage a country thatcan produce a good with fewerresources than can other countries.

c. comparative advantage a countrythat can produce a product orservice at lower opportunity coststhan another country.

International Trade Barriers:

A. tariffs a tax to be paid forimporting or exporting goods.

a. Export tariff one that iscollected by the exportingcountry

b. Transit tariff one that iscollected by the country

through which the goodshave passed

c. Import tariff one that iscollected by the importingcountry.

A tariff may be assessed as follows:1. specific duty assessment onthe basis of a tax per unit.2. ad valorem duty assessmentas percentage of the value of theitem3. compound duty acombination of specific and advalorem duties.

Import tariffs are imposed for thefollowing purposes:

1. for raising revenues;2. to reduce the overall level of

imports by making them moreexpensive than the locally producedsubstitute, with the aim ofeliminating a balance of paymentsdeficit;

3. to counter dumping by raising theprice of the dumped commodity;

4. to retaliate against restrictivemeasures imposed by othercountries;

5. to protect an infant industry untilit has grown and is able tocompete with the more developedindustries of other countries; and

6. to protect vital industries such asagriculture.

B. Non-tariff barriers


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1. Direct Price Influences - One wayof controlling trade is to influencethe price of commodities that areimported or exported.

a. Subsidies are direct orindirect governmentalassistance to companies, to

make their goods morecompetitive with imports.

b. Customs valuation refersto the authority granted tocustom officials indetermining the value of animported commodity.

c. Other direct priceinfluences

i. Special feesii. Requiring the

advanced placement

of customs depositbefore shipment ismade

iii. Requiring minimumselling prices of goodsafter customsclearance have beenmade

2. Quantity Controls another wasof controlling trade is the use ofsome means of effectively limit the

quantity of goods trades betweencountries.

a. Quotas are limits placed onthe quantity of specifiedproducts allowed to beimported into or exported outof a country.

b. Buy-local legislations -are those designed by thegovernment to givepreference to the locallymade goods.

c. Standards refers toclassifications, labeling, andtesting set by a country.

d. Specific permissionrequirements- are formscontrolling trade whereby thecountry requires permissionfrom the government beforeengaging in foreign trade

e. Administrative delays

f. Reciprocal arrangements

require exporters to acceptmerchandise as payment forthe exported goods.

g. Restriction on services refer to arrangementswhereby an importer orexporter is required to useservices of domesticcompanies in moving goodsfrom one country to another.

new notes for fiscal, international trade policy 2

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