Understanding International Trade: Key Concepts and Calculations
Challenges in the European Union
The European Union (EU) faces economic challenges, particularly concerning the fiscal deficits of Greece and Spain and the banking crisis within the eurozone. Greece’s substantial spending on the 2006 Athens Olympics, intended to boost tourism and economic growth, resulted in social unrest due to poor economic conditions and a lack of effective public policies. Similarly, Spain’s high taxes have led to social movements like M11, questioning excessive public expenditures and inadequate support for farmers and the middle class.
A potential solution is to promote support for eurozone producers, enabling them to compete with exports from Asia, Africa, and Latin America. Additionally, fostering the middle class and implementing educational plans could generate social benefits while reducing inefficient spending on events like religious visits and sporting competitions. The focus should shift towards specializing in agricultural production, particularly olives, wine, and livestock, leveraging the tourism potential of both Greece and Spain.
Key Terms in International Trade
Dumping and Anti-Dumping Measures
Dumping is the illegal practice of selling foreign products at prices lower than their domestic market value, creating unfair competition. To counter this, countries implement anti-dumping measures to protect domestic industries.
Countervailing Duties and Safeguard Measures
Countervailing duties are imposed by importing countries to offset subsidies granted to foreign producers. Safeguard measures allow WTO members to temporarily restrict imports to protect domestic industries from serious injury caused by increased imports.
Other Important Concepts
- Circumvention: Measures taken by exporters to evade anti-dumping or countervailing duties.
- Lobby: A group influencing executive or legislative decisions in favor of specific interests.
- Nomenclature: A systematic classification of goods for technical and legal purposes.
- Mersiology: Knowledge related to the technical aspects of end products.
- Certificate of Origin: A document accompanying imported goods, verifying their origin and determining applicable tariffs.
Calculating Costs and Duties
Raw Calculation
The raw calculation involves determining the cost, insurance, and freight (CIF) value, considering interest and exchange rates.
Insured Amount and MVPi
The insured amount is typically 1% of the CIF value and is added to it. The MVPi (Monto Valorado para Importacion) includes the CIF value and subsequent costs.
PUL and Loss Calculation
The PUL (Precio Unitario de Liquidacion) is calculated by dividing the MVPi by the quantity of packages. The loss is determined by multiplying the shrinkage percentage by the PUL.
Deductible and Compensation
The deductible is a percentage of the insured amount. The compensation is calculated by subtracting the deductible from the loss.
Customs and Trade Zones
- Private Warehouse: A designated area where foreign goods are stored under customs authority without paying import duties and taxes.
- Customs Tariff: A systematic list of taxes applied to goods entering or leaving a country.
- Domestic: Sea freight transport within a country’s coastal waters.
- Ad-valorem Duty: A customs duty based on the value of the goods.
- Zone: A demarcated area near a port or airport with customs privileges.
- Extension Zone: A city or region adjacent to a free zone.
- Primary Zone: An area where goods are loaded, unloaded, or received for import, export, or transit.
- School Zone: An area under the jurisdiction of a specific customs office.