Trade policy instruments are used to facilitate the trade operations and create a balance between them. These instruments benefit both tiers of the business: customers and manufacturers. The most sharp among these instruments are:
Import quota: Direct restriction on the finished goods/ value added goods which is imported into a country.
Subsidy: Government payment to domestic products.
Tariffs: Taxes levied on the imports of raw material.
Surgical Goods industry of Sialkot, Pakistan is one of the most productive industry clusters in Pakistan. In spite of having the recent success, the industry has not been able to control the production quality and develop the brands. Lack of Research and development has made it hard to avail the quality raw materials at economical prices; hence focus has been on low-tech, low quality and low value products. Most of the local companies are working as vendors and serving the international brands of foreign businesses. Pakistan’s local customers and manufacturers, both are suffering from this situation.
After analyzing the above scenario, discuss which instrument is most beneficial tool to address the issue?
Pick one and support your answer with the arguments. Arguments should be relevant and to the point.
Surgical goods industry of Sialkot is one of the best industry in Pakistan but now problem is in the quality in the production of goods and because of that the raw material of good quality is not available at reasonable price and there is no research and development, so the focus in on the low quality, low technology and there is no research and development so due to these issues most of the Pakistan local companies are working as vendors and serving the foreign business and due to this local customers and manufacturers are suffering from this situation now you choose which instrument is best to solve this issue subsidy, import quota or tariffs.