Summary of Government Influence on Trade
Summary of Government Influence on Trade
Despite the potential resource benefit of free trade, no country permits an unregulated flow of goods and services.
Given the possibility of retaliation and the fact that imports as well as exports create jobs, it is difficult to determine the effect on employment of protecting an industry.
? Policymakers have not yet solved the problem of redistribution of income through changes in trade policy.
? The infant-industry argument for protection holds that without governmental prevention of import competition, certain industries would be unable to pass from high-cost to low-cost production.
? Because industrial countries are generally more advanced economically than nonindustrial ones, governmental interference is often argued to be beneficial if it promotes industrialization.
? Direct influence on trade is used as a more selective means of solving balance-of-payments disequilibrium than resorting to either changes in currency values or internal price adjustments.
? Trade controls are used to control prices of goods traded internationally. Such controls include protection of monopoly positions, prevention of foreign monopoly prices, greater assurance that domestic consumers get low prices, and requiring foreign producers to lower their profit margins.
? Much of the interference in the free flow of goods and services internationally is motivated by political rather than economic concerns, including maintaining domestic supplies of essential goods and preventing potential enemies from gaining goods that would help them achieve their objectives.
? Many nonindustrial countries are seeking export markets within the industrialized world for their manufactured products but argue that the effective tariffs on their products are too high.
? Trade controls that directly influence price and secondarily influence quantities include tariffs, subsidies, minimum price laws, arbitrary customs valuations, and special fees.
? Trade controls that directly affect quantity and secondarily affect price include quotas, "buy-local" regulations, licensing, foreign-exchange controls, arbitrary standards, administrative delays, and requirements to take goods in exchange.
? The General Agreement on Tariffs and Trade (GATT) is the main negotiating body through which countries have multilaterally reduced trade barriers and have agreed on simplified mechanisms for the conduct of international trade. However, recent experience indicates that further trade liberalization on a global basis will be harder to achieve.
The development of an international strategy will greatly determine whether firms will benefit best from protectionism or from some other form of countering international competition.
Despite the potential resource benefit of free trade, no country permits an unregulated flow of goods and services.
Given the possibility of retaliation and the fact that imports as well as exports create jobs, it is difficult to determine the effect on employment of protecting an industry.
? Policymakers have not yet solved the problem of redistribution of income through changes in trade policy.
? The infant-industry argument for protection holds that without governmental prevention of import competition, certain industries would be unable to pass from high-cost to low-cost production.
? Because industrial countries are generally more advanced economically than nonindustrial ones, governmental interference is often argued to be beneficial if it promotes industrialization.
? Direct influence on trade is used as a more selective means of solving balance-of-payments disequilibrium than resorting to either changes in currency values or internal price adjustments.
? Trade controls are used to control prices of goods traded internationally. Such controls include protection of monopoly positions, prevention of foreign monopoly prices, greater assurance that domestic consumers get low prices, and requiring foreign producers to lower their profit margins.
? Much of the interference in the free flow of goods and services internationally is motivated by political rather than economic concerns, including maintaining domestic supplies of essential goods and preventing potential enemies from gaining goods that would help them achieve their objectives.
? Many nonindustrial countries are seeking export markets within the industrialized world for their manufactured products but argue that the effective tariffs on their products are too high.
? Trade controls that directly influence price and secondarily influence quantities include tariffs, subsidies, minimum price laws, arbitrary customs valuations, and special fees.
? Trade controls that directly affect quantity and secondarily affect price include quotas, "buy-local" regulations, licensing, foreign-exchange controls, arbitrary standards, administrative delays, and requirements to take goods in exchange.
? The General Agreement on Tariffs and Trade (GATT) is the main negotiating body through which countries have multilaterally reduced trade barriers and have agreed on simplified mechanisms for the conduct of international trade. However, recent experience indicates that further trade liberalization on a global basis will be harder to achieve.
The development of an international strategy will greatly determine whether firms will benefit best from protectionism or from some other form of countering international competition.
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