Tools of trade policy Myanmar

Compare the policies in other countries (posted by other students) and comment on it. (at least 2 posts should be commented)

 

 

 

Post 1 Tools of the trade policy Myanmar are applying towards the trading partners            

Despite being a founding member of the World Trade Organization (WTO), Myanmar was cut off from the rest of the world for decades due to political unrest. Not until 2011, under a new administration run by civilians, did the nation begin to seek fundamental changes to drive structural transformations, boost national productivity, and encourage economic growth. In accordance with the guidelines of the WTO, the current regime worked closely with the various ministries to promote trade (Doan, 2019). To do this, the government first issued, amended, or revised several laws that were connected to trade in order to bring them into line with global commitments. Myanmar has a long history of protecting its local producers through the use of tariffs, quotas, and subsidies. These measures have been used to protect a variety of industries, including agriculture, manufacturing, and services. Tariffs are taxes on imported goods that make them more expensive than similar domestic products. Quotas limit the amount of a particular good that can be imported into a country. Subsidies are payments from the government to domestic producers to help them compete with imported goods.

In 2000, Myanmar’s government enacted a series of tariffs designed to promote the growth of the nation’s industries and protect specific businesses. By making imported goods more expensive, tariffs make it more difficult for foreign companies to sell their products in Myanmar (Doan, 2019). This gives local producers a better chance to succeed. Tariffs are a tool that the government can use to promote local industry and protect jobs. When foreign companies are unable to sell their goods as easily in Myanmar, it reduces the amount of competition for local producers. This gives them a better chance to sell their products and thrive. Myanmar’s tariffs are typically quite high, often ranging from 20 to 30 percent. They cover a wide range of products, including agricultural goods, manufactured products, and raw materials. Tariffs are often applied when Myanmar’s government is trying to encourage the growth of certain industries or protect specific businesses. Myanmar has linked 18.4percent of its tariff lines using the 10-digit HS code. Every fixed rate is ad valorem. The typical bound rate is 87.5%.   The average limit tariff on agricultural items is 110.7%, whereas the average bound tariff on non-agricultural commodities is 22.5percent. Final bound tariffs vary from 0% for industrial machinery and transportation equipment to 550percent for chemicals, drinks, tobacco, grains, and foodstuffs.

Myanmar’s administration uses a system of production quotas to protect local producers and encourage economic growth. The size and scope of the quotas vary depending on the product, but they are typically set at a level that is intended to encourage local production without stifling competition. Quotas are often applied to products that are considered essential to the local economy, such as rice and corn (Naing, 2016). They can also be used to protect certain industries, such as the garment sector. Quotas typically remain in place for a set period of time, after which they are reviewed and may be renewed or lifted. As a direct response to the classification of COVID-19 as a pandemic, Myanmar instituted export limits on rice with the intention of averting severe rice shortages. Rice is a fundamental component of the Burmese  diet, therefore its availability is of the utmost importance. The initial phase of the implementation of the restrictions included the interim suspension of export licenses in March 2020. This was done in preparation for the introduction of new regulations regarding the export of rice. A monthly quota for shipments oversea was established at 100,000 tonnes, and the quota for shipments over the border was fixed at 50,000 tonnes (WTO, 2020). As a result, the limits were deemed to be reasonable and justifiable given the circumstances, and not projected to have any large negative consequences on rice-importing countries.

The Myanmar government has used subsidies to protect local producers in a number of ways. For example, it has provided subsidies to farmers to help them purchase inputs such as seeds and fertilizer. It has also supported the construction of infrastructure such as irrigation systems. In addition, the government has provided subsidies to businesses to help them expand their operations or to help them with the costs of relocating to Myanmar. In the manufacturing and industrial sector, the government has provided subsidies to businesses to help them expand their operations or to help them with the costs of relocating to Myanmar. This has helped to create jobs and boost the economy. During the COVID-19 epidemic, the government of the country implemented to help alleviate some of the financial burdens that the people was experiencing. After that, the subsidies continued to be prolonged on a month-to-month basis (Doan, 2019). According to U Soe Mint, who is the Deputy Permanent Secretary at the Ministry, the total amount of the subsidies is roughly K35 billion each month.

 

From the above graph it is clear that Myanmar’s government has been spending heavily on subsidies (CEIC, 2018). This was aimed at helping boost production at the local economy. The graph shows the expenditure incurred by the government from 2013 to 2018 in form of subsidies which has an upward trajectory. Implying that the government has been subsiding production in the country.

What are the reasons of applying these measures and how it benefits the local economy?

There are a few reasons why Myanmar’s government might apply tariffs. One reason is to encourage the growth of certain industries. Another reason is to protect specific businesses. These measures can benefit the local economy by supporting the growth of Myanmar’s industries and protecting businesses from foreign competition. However, they can also lead to inflation and product shortages. The main rationale behind using quotas is to spur local economic growth and protect domestic producers (Nicita, 2018). By setting a quota, the government is essentially saying that it wants more of this product to be produced locally, rather than imported. This can help to boost employment and growth in the local economy. It can also help to keep prices down for consumers, as local producers are often able to sell their goods at a lower price than imported goods.

The main reason for providing subsidies to local producers is to protect and promote the development of the local economy. By subsidizing the costs of inputs or production, the government can help businesses expand their operations and create more jobs. This in turn can help to boost economic growth and reduce poverty. In addition, by supporting the construction of infrastructure, the government can help to improve the business environment and make it more attractive for investment.

Reply example:

Hello Wayne! Thank you for your analysis of the trade policies applied in Myanmar. I think it is very interesting given the fact that Myanmar is not in the WTO anymore and has to trade by itself without any written agreement. I think that the fact that your country wants to protect certain products traditionally produced in your country is very similar to what the European Union is trying to do as well. On the other side, the government is also giving a lot of subsidies to local producers to help them and to grow their businesses and this is also a common point with the European Union trading policies. I like the fact that Myanmar is trying to boost its, until now, weak economy by investing on the potential of domestic products. It is without any doubt a strategy that it is working as Myanmar population has access to cheaper and high quality products. On the other hand, it is profitable in a way that those products can be exported in the world if the domestic demand is lower than the quantity produced. A way to become a developed country, in my opinion, is to show to the world that you are able to live and to survive without the help of the others and this is exactly what Myanmar is trying to prove. I liked your analysis and it was really interesting to read it, thank you!

 

 

 

Post 2

According to the Observatory of Economic Complexity (OEC) , Saudi Arabia was the world’s 20th largest economy in terms of GDP (current US dollars), 30th in total exports, 30th in total imports, 46th in GDP per capita (current US dollars), and 32nd in economic complexity (ECI).( Simoes, 2011)

For tariff classification, Saudi Arabia employs the Harmonized Commodity Description and Coding System. Saudi Arabia has signed a number of trade partnerships (particularly with the Gulf Cooperation Council – GCC) that exclude member countries from all import tariffs.

As a member of the GCC, it imposes a common external tariff of at least 5% on most commodities imported from nations outside the GCC. The C.I.F value is used to compute customs duties. The tax and customs authority and the Zakat (for Muslims) have issued an updated Harmonized Tariff Schedule that would raise different import taxes rates beginning in June 2020. While the increases remain within World Trade Organization ceilings, many tariffs have been raised by up to 25%. The Saudi government also raised the value-added tax (VAT) rate from 5% to 15%

Saudi Arabia currently joins its Gulf Cooperation Council (GCC) countries in charging extra taxes on cigarettes (100%), carbonated beverages ( 50%), and caffeine drinks  (100% ).

Saudi Arabia Standards, Measurements, and Safety Organization (SASO) is the regulatory authority in charge of overseeing the quality of goods imported into Saudi Arabia. To verify that all imported goods meet Saudi standards, a compatibility certificate is necessary. Suppliers willing to export goods to Saudi Arabia must comply with the Saudi Arabian product safety program, which is an electronic portal, used to register both regulated and uncontrolled products with the necessary shipping documentation. (International Trade Administration, 2022)

Saudi Arabia purchases more than $1 billion in agricultural products from the United States each year. The large majority of food products are entitled to an import tariff of 10 to 15%. However, certain processed foods are subject to higher import tariffs. To preserve local food producers and production against cost-effective imports. Saudi Arabia based import taxes on the number of equivalent products produced locally. When local production of a food or agricultural product reaches self-sufficiency, a maximum import tariff level of 40% ad-valorem is imposed as a general principle. Imports of (wheat, baby milk, and animal feed) are subsidized, whereas imports of (coffee, tea, and fresh meat) enter the country duty-free. (International Trade Administration, 2022)

Certain items are either forbidden or require special permission from the relevant authorities. ( alcohol, weapons, pork products, used clothing, and vehicles and car parts older than five years is prohibited. Imports of specific products, including horses and other live animals, agricultural seeds, books, magazines, audio or visual media, and religious materials that do not comply to the true version of Islam or that connect to a religion other than Islam, require special permission.

 

How Saudi Arabia Government benefits the local economy?

Vision 2030 intends to increase local markets in many industries by localizing the manufacturing of goods and services in order to increase competitiveness and provide long-term job opportunities. A number of measures have been initiated to enhance the rate of localization and support national products, as well as to diversify the Kingdom’s industrial base to include the creation of new products. The Strategy took the lead in increasing non-oil exports, and a variety of efforts, including the formation of strategic partnerships, were launched to enable Saudi enterprises to access global markets. The Saudi Export-Import Bank (EXIM) was founded to assist export finance, and the General Authority for Foreign Commerce was established to maximize the Kingdom’s gain in global trade, improve competitiveness, and allow access to international markets. ( Saudi Vision 2030, 2022)

 

 

Reply example:

Thankyou Abdullah, it was very well written report. As you mentioned about trade partnerships, does Saudi Arabia have some special trade regulations with any EU country and the States or just normal trade regulation as States is one of the largest importer of Oil from Saudi Arabia, and as you export so much oil does it give you any other benefits and tariff reduction? like you mentioned Saudi Arabia imports more than $1 billion worth of agricultural products. Talking about vision, we all are aware of “The Line” has the government given subsidies or rebates for imports for the products required for the construction of it, and want to add one more point, why doesn’t the government help the locals and give permission to start local manufacturing of carbonated beverages and caffeine drinks (as you mentioned there is a 50% and 100% import tariff respectively), as it will help in the growth of GDP and help gain more employment.

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