Beitbridge border post. image credit thezimbabwemail.co.zw

Beitbridge border post. image credit thezimbabwemail.com

ZIMSEC O Level Commerce: Measures the government can use to control trade

Trade (tariff) barriers.

  • These are measures taken by government to reduce imports and in some cases ban trade completely with some countries.

Customs (import) duty

  • A tax levied on imported dutiable goods.
  • Makes imports more expensive when compared to locally made goods.

Quota

  • A limitation on the quantity of goods to be imported.
  • Reduces the quantity o imports.

Embargo.

  • A complete forbidding trade with other countries either for political or health reasons.
  • Reduces imports to zero.

Foreign exchange control.

  • The government, through the Reserve Bank of Zimbabwe, may ration or refuse to offer foreign currency to importers.
  • Restricts importer from buying goods.

Import licences

  • The government may refuse to issue new licences or renew expired import licences.
  • Reduces the number of importers and consequently imports.

Subsidies

  • The government may subsidise ( give money to) exporters.
  • Exporting becomes cheaper and importing remains expensive.

Devaluation of local currency.

  • The local Zimbabwean currency will be worth less in foreign currency terms.
  • Imports thus become more expensive and exports much cheaper.
  • For example if an item costs US $500 to import and the exchange rate is US$1=Z$2
  • The item will cost Z$1000 to import.
  • If the Zimbabwean currency is devalued to US$1 = Z$ 4
  • The item will cost Z$2000.
  • On the other hand if an item costs Z$1000 to export at the former exchange rate of US$1: Z$ 2 It will cost US$500 on the international market.
  • When the currency is devalued to US$ 1: Z$4 the time will cost US$250 on the international market.

To access more topics go to the Commerce Notes page.


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