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.
- A limitation on the quantity of goods to be imported.
- Reduces the quantity o imports.
- 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.
- The government may refuse to issue new licences or renew expired import licences.
- Reduces the number of importers and consequently imports.
- 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.