The Role of the State: Automobile Industry, Summary

Topics: Developed country, Emerging markets, Japan Pages: 2 (537 words) Published: August 19, 2010
Automobile industry -The role of the state
Historically the state has always played a major role in the automobile industry. The two most notable influences are: 1. Determining the degree of access to its domestic market that the state allows, including the terms under which foreign firms are permitted to establish production plants 2. Establishing the kind of support provided by the state to its domestic firms and the extent to which the state discriminates against foreign firms. The use of tariff and non tariff barriers has been significant in virtually all countries. However, the use of tariffs has been substantially reduced and trading has been far more open and relaxed since the end of the 1990’s. The use of tariffs in the modern day is split into two main trends; developed economies tend to have relatively low tariffs and developing economies the opposite. However, the difference in tariff’s used by developed economies is quite drastic. The EU operates a tariff of 11%, whereas the USA has a 3% tariff, in contrast with Japan that maintains a tariff of 0%. The declining significance in the use of tariff barriers has seen a rise in the use of various other forms of trade barrier including import quotas. The state is a major force in determining the current geographical configuration of the automobile industry which remains determined by the levels of tariffs quotas but more significantly now in the use of ‘differential’ tariffs and quotas. This situation reveals a states attempt to stimulate their own national industries. For example, the state may place high tariffs on imported vehicles but place low tariffs on imported components thus encouraging local production. This approach has become more pervasive and has been heavily pursued in Latin America, some Asian countries, Europe and the USA. Emerging markets have three distinctive types of automobile regime, each with a different policy emphasis: 1. Protected autonomous markets (PAMs): countries...
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