Question

You are an employee of an US firm that produces personal computers in Thailand and then exports them to the US and other countries for sale. The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce. Other possible locations considered at that time were Malaysia and Hong Kong. The US government decides to impose punitive 100% ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict US exports to Thailand. How should your firm respond? What does this tell you about the use of targeted trade barriers?

Answer 1

Answer:

In the short-run, I will encourage my firm to export the computers to Canada first, directly from Thailand.  From Canada, the computers can be exported into the USA.  But this is not the long-term solution.  There will be need to find another country in which production will be cost-effective and from which the goods can be exported directly into the USA.

Another approach would be to engage in lobbying, within acceptable rules, the governments of Thailand and the US to end the administrative barriers.

Explanation:

There is no single economy that benefits from trade restrictions. Therefore, every effort should be made to reduce, to the barest minimum, all forms of trade barriers, which stunt economic growth and development.  Give and take, in the spirit of competition, should be encouraged at all times.