Trade policy (1 Viewer)

[posterboy142]

in econoic policies and management i'm having touble with the two dot points under trade policy:

direct and indirect policies to promote or restrict trade; and

trade and industry polcies in Asutralia

 

[ToO LaZy ^*]

direct- trade policy/competition policy (eg National Competition Policy)
this reduces trade barriers such as tariffs so that trade btwn countries flow more efficiently

indirect- monetary stance- consumers may be attracted to foreign markets if interest rates are lower than domestic interest rates..

trade and industry policies should be in ya text book

 

[tWiStEdD]

Direct policies include, as lazy said, reductions in official barriers to trade such as tariffs, excise taxes and deliberate depreciations of the exchange rate. Anything the government deliberately does to allow trade to flow more freely or less freely is a directly policy that affects trade volumes.

Indirect policies include quarantine requirements (less so the monetary stance... that's a direct measure, lazy.), environmental standards etc. Anything which the government or its departments do that indirectly affect trade volumes. They can be conscious of the effect on trade, but may use it to avoid economic retaliation.

just like lazy, i dont know trade and industry policies. look it up.

 

[ToO LaZy ^*]

about monetary stance...shouldn't that be indirect because it's a macro rather than a micro policy and since mirco policies only deal with structural changes ie. trade policy.

could you explain plz.

 

[tWiStEdD]

i'm not overly familiar with trade policy (yet). in changing interest rates the government directly alters financial conditions with the INTENT to alter the exchange rate and thus trade flows.

 

[ToO LaZy ^*]

hmm..ok
this is how i see it..
RBA's role is to alter interest rates --> the RBA is the main government arm used to implement monetary policy --> but since the primary objectives of monetary policy are: price stability, full employment and economic growth (sustainabilty), it does not specifically target exchange rates.
however, that being said, you could say that the use of monetary policy has 'transmission channels' that affect exchange rates indirectly and hence the volume of exports and imports

 

[posterboy142]

thanks alot...looks like i've finshed sumarising the syllabus