Question

Hello, I was asked to explain content laws (e.g. 'buy American') and I cannot seem to find anything specific on this. Would you be able to steer me in the right direction? The question relates to international business and asked directly after this are questions about trade deflection and trade theory.

Answer 1

answer-

Content law is related to law for the minimum percentage of a products total value that must be produced domestically if the product is to qualify for zero tariff rates. Like Buy American act of 1933 is the earliest and arguably the best known of various statutes regarding federal procurement of domestic products. Essentially, the act attempts to protect U.S. businesses and labor by restricting the acquisition and use of end products or construction materials that are not“domestic.

In international trade or business context, this law help American brands and businesses to deal with foreign brands like Chinese Brands because government put restrictions like tariffs, taxes, quotas etc on foreign products so that U citizens uses American made products and it helps American businesses to deal with competition from foreign Brands.

trade deflection is related to The movement of goods or components of goods from outside a trading arrangement to a country within such an arrangement in order for the seller to benefit from trading preferences.

Under trade theory, trade is diverted from a more efficient exporter towards a less efficient one by the formation of a free trade agreement or a customs union. Total cost of good becomes cheaper when trading within the agreement because of the low tariff.