Type
Essay
Pages
5 pages
Word Count
1582 words
School
florida atlantic univers
Course Code
N/A

Comparative Advantage

July 14, 2020
RELATED THEORY
Based on this paper assignment, our group has two related theories we learned from class
to discuss further for this case. The reason is to propose explanations of the underlying causes
or influences of observed phenomena- personal protective equipment (PPE) trade during Covid-
19. First is about the instrument of trade policy on Malaysia and China, and the second is about
the comparative advantage theory on these two countries.
In our studies based on international trade policy, most of the theoretical trade policy study
is conducted in terms of tariffs that is, duties imposed on imports. A specific tariff is levied as
a fixed charge for each unit of imported goods. Tariffs are the oldest form of trade policy and have
traditionally been used as a source of government income.Tariffs is also a policy tool to protect
domestic industries by changing the conditions under which goods compete in such a way that
competitive imports are placed at a disadvantage. Tariffs therefore benefit the government and
producers of the importing country in the form of tax revenues and producer surpluses at the
expense of its consumers in the form of higher prices. However, during COVID-19 pandemic
outbreak, Malaysia and China took different measures on tariff issues.
Before COVID-19 existed, Malaysia government imposed import duty for 20% and sales
tax for 10% on face masks- one of the PPE products. However, when the pandemic of COVID-
19 outbreak, Malaysia government announced the exemption of import duty (20%) and sales tax
(10%) on face masks. That effective on 23 March until the government declares the end of the
COVID-19 pandemic. According to the World Trade Organization (WTO), 80 countries are limiting
export of face masks, gloves and other related PPEs products to mitigate shortage since the
COVID-19 outbreak began,including Malaysia. The government, through the Royal Malaysian
Customs Department, has banned exports of face masks to ensure sufficient supply for
Malaysians during the COVID-19 pandemic. Registered manufacturers are also given sales tax
exemption for the sales of face mask products, but there is no exemption for raw materials unless
the manufacturer already has Licensed Manufacturing Warehouse status or has Article 14(2) of
the 1967 Tariff Act and Item 35 (3) (a) of the 2018 Sales Tax Act exemption from the Finance
Ministry. Face masks are currently scarce in the country due to the Covid-19 outbreak and the

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