By placing tariffs on imported goods, governments can increase the cos

QUESTION

By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

Indicate whether the statement is true or false.

ANSWER

TRUE
Transportation costs aside, some firms undertake foreign direct investment as a response to actual or threatened trade barriers such as import tariffs or quotas. By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing. Similarly, by limiting imports through quotas, governments increase the attractiveness of FDI and licensing.