You are an employee of an U.S. firm that produces personal computers in Thailand and then exports them to the U.S. and other countries for sale....

Possible Response of U.S. Firm

A U.S. firm responding to a U.S. ad valorem tariff (product value tariff) imposed on a country to where the manufacture of the firm's product is outsourced might be (1) a relocation to a free trade zone (FTZ) or (2) a political appeal through lobbying to have the punitive tariff repealed. Since the newly imposed U.S. tariff--adding a duty at 100 percent of the valueof the computer--is a retaliation...

Possible Response of U.S. Firm

A U.S. firm responding to a U.S. ad valorem tariff (product value tariff) imposed on a country to where the manufacture of the firm's product is outsourced might be (1) a relocation to a free trade zone (FTZ) or (2) a political appeal through lobbying to have the punitive tariff repealed.

Since the newly imposed U.S. tariff--adding a duty at 100 percent of the value of the computer--is a retaliation for a Thai administrative trade barrier that adopts rules for regulating U.S. imports into Thailand, the U.S. computer firm can escape the consequences of the governmental policy issue by moving manufacturing to Malaysia or Hong Kong (alternative early contenders). Such a relocation is not unprecedented as shown by the (economically and environmentally disasterous) removal of electronics companies from Mexico's maquiladoras, after their boom in the late 1990s, to relocate in Asia to take advantage of lower costs.

Another option is to focus on lobbying in the political arena for the reduction of punitive trade barriers. One strategy would be lobbying to incentivize Thailand's importation of U.S. goods through an appropriate means. Another strategy would be to aim to focus attention in bilateral talks on reducing subsidiaries, regarding such reduction as an economic priority.

Targeted Trade Barriers

Economists generally agree that targeted trade barriers restrict economic growth, causing global demand to decline and threatening global market stability. An example of this occurred in 2009 when Mexico retaliated against U.S. cancellation of a Mexico-U.S. agreement regarding Mexican truck drivers. Examining targeted trade barriers and potential responses tells us that protectionist trade policies and targeted trade barriers carry negative ramifications for the health of the global market.