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●● A foreign-exchange control is a restriction on theamount of a particular foreign currency that can bepurchased or sold. By limiting the amount of foreigncurrency importers can obtain, a government limits theamount of goods importers can purchase with that currency.This has the effect of limiting imports from thecountry whose foreign exchange is being controlled.●● A nation can increase or decrease the value of its moneyrelative to the currency of other nations. Currencydevaluation is the reduction of the value of a nation’scurrency relative to the currencies of other countries.Devaluation increases the cost of foreign goods, whereasit decreases the cost of domestic goods to foreign firms. Forexample, suppose that the British pound is worth $2. In thiscase, an American-made $2,000 computer can be purchasedfor £1,000. However, if the United Kingdom devalues thepound so that it is worth only $1, that same computer will cost£2,000. The increased cost, in pounds, will reduce the importof American computers—and all foreign goods—into England.On the other hand, before devaluation, a £500 set of Englishbone china will cost an American $1,000. After the devaluation,the set of china will cost only $500. The decreased cost willmake the china—and all English goods—much more attractiveto U.S. purchasers. Bureaucratic red tape is more subtle than theother forms of nontariff barriers. Yet it can be the most frustratingtrade barrier of all. A few examples are the unnecessarily
restrictive application of standards and complex requirements
related to product testing, labeling, and certification.
Cultural Barriers Another type of nontariff barrier is related
to cultural attitudes. Cultural barriers can impede acceptance of
products in foreign countries. For example, illustrations of feet
are regarded as despicable in Thailand. Even so simple a thing as
the color of a product or its package can present a problem. In
Japan, black and white are the colors of mourning, so they should
not be used in packaging. In Brazil, purple is the color of death.
And in Egypt, green is never used on a package because it is the
national color. When customers are unfamiliar with particular products from another
country, their general perceptions of the country itself affect their attitude toward the
product and help to determine whether they will buy it. Because Mexican cars have not
been viewed by the world as being quality products, Volkswagen, for example, may not
want to advertise that some of its models sold in the United States are made in Mexico.
Many retailers on the Internet have yet to come to grips with the task of designing an
online shopping site that is attractive and functional for all global customers.
Gifts to authorities—sometimes quite large ones—may be standard business procedure
in some countries. In others, including the United States, they are called bribes
or payoffs and are strictly illegal.
Reasons for Trade Restrictions
Various reasons are given for trade restrictions either on the import of specific products
or on trade with particular countries. We have noted that political considerations
usually are involved in trade embargoes. Other frequently cited reasons for restricting
trade include the following:
●● To equalize a nation’s balance of payments. This may be considered necessary to
restore confidence in the country’s monetary system and in its ability to repay its debts.
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