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Its an exam so can you give me answers i will send you questions.

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Its an exam so can you give me answers i will send you questions.
Answered Same Day Jun 10, 2021


Alomita answered on Jun 12 2021
147 Votes
Section 1 :
International trade and exchange rates.
Trade between countries without any restrictions is known as free trade. Indonesia’s textile and leather footwear industry used to export a lot of shoes in the 1990s and in the 2000s, but it is facing a tough competition from lower-cost producing countries like Vietnam and China. The government of Indonesia needs to adopt certain policies in order to protect the exporters from crushing down and also to prevent domestic job losses. They are as follows :
1. The government may adopt export subsidy policy to support them which will lower the production cost so that the producers can produce and sell the items more cheaply and compete overseas.
2. Another protection policy which can be adopted by the government is the Voluntary Export Restraint(VER) agreement. It is a quota on trade imposed from the exporting country’s side instead of the importing country.
Both export subsidy and the VER agreement would benefit the exporting country in its trade with the foreign countries. This can be seen as follows :
1. When the government provides an export subsidy to the exporters, the exporters would export the good up to that point at which the domestic price exceeds the foreign price by the amount of the subsidy.
2. The VER on the other hand, would restrict the exporting volumes of the co7untry which will eventually protect against competition in the world market.
The effects of an export subsidy on the country can be determined by the following diagram.
Clearly, from the above diagram, we can see the following conclusions :
1. an export subsidy raises the prices in the exporting country while lowering them in the importing country. This is so because, in the exporting country both consumers and the government losses.
2. The government losses because it must expend money on the subsidies.
3. The ultimate gainers are the producers.
4. In the above figure, are a and area b represents consumption and production distortion losses similar to that of a tariff.
5. In addition and in contrast to a tariff as well, the export subsidy worsens the terms of trade because it lowers the price of the export in the foreign market, the price falls from pw to p*s. This leads to the additional terms of trade loss , that is area e+f+g, which is equal to Pw – p*s times the quantity exported within the subsidy.
So , an export subsidy unambiguously leads to costs that exceeds its benefits.
Following can be concluded with the imposition of the VER agreement :
1. The VER is generally imposed at the request of the importer and is agreed to by the exporter to forestall other trade restrictions.
2. The agreement is always expensive to the importing country than a tariff that limits imports by a certain amount. In a study, it showed that the bulk of the cost represents a transfer of income rather than the loss of efficiency.
3. The estimation also provides the evidence that it is much more costly than tariffs from a national point of view.
Indonesia’s cu
ent trade deficit has declined to 0.35 USD billion in April 2020. Over the past 25 years, Indonesia has been recording a consistent trade surplus. This is mainly because of its robust export growth and cheap production costs. But from the year 2012 , the country experienced trade deficits due shrinking of its exports which resulted from global economic slowdown and fall in commodity...

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