Comparative advantage RELATED

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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
inability of local manufacturers to meet the demand due to a lack of raw materials, has forced
companies to source for the item abroad.In Malaysia, the government expected to hand out 24.62
million free masks, four each households. Remember that Malaysia does not have an issue of a
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health crisis on masks and gloves because the government imposed restriction on Movement
Control Order (MCO) to weaken the chain of COVID-19.
For China, they use non-tariff barriers. Non Tariff barriers is any measure, other than a
customs tariff, that acts as a barrier to international trade. Nontariff barriers include quotas,
embargoes, sanctions and levies. China added non-tariff barriers to the export of medical PPEs
abroad, possibly making such goods less accessible and more expensive. That means, the other
country affected by this trade measure. For example, the country affected by this measure is
Canada. Right now, Canada is facing a major shortage of PPE products as 68 countries restrict
exports. According to Omar Allam, founder and CEO of trade consultancy Allam Advisory Group,
who has been helping Ottawa (Canada region) secure PPE import procurements from Asian
markets, stated that there’s a lack of trust in the Canada-China relationship in term of product
quality but right now PPE demands across the provinces and territories are getting serious; lives
are on the line. That’s the reason Canada imposed duty relief on this PPE and required the
exporting China company to sign a declaration that the products they are buying from China are
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