Local Government Protect Local Trade Policy Case Study

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Recommended: Impact of international trade

It is important and essential that local governments protect their local businesses through instruments of trade policy. There are many different instruments of trade policy but they all have the same intention of protecting local trade and making it more difficult and costly for international businesses. Without the use of the trade policies it would be very easy and cost efficient for overseas organisations to steal business of local industries, which would have a detrimental effect on the amount of local businesses but also the local economy. A way in which a government can increase the risk and cost for an international company is to levy a tariff on any imports. This means that they will have to pay an extra tax while importing goods into …show more content…

As trade has consistently grown faster than GDP and has been an important driver of world growth the relationships with international countries are necessary. A way in which to build the association between counties is to create a trade partnership that is mutually beneficially for all of the parties involved. A method that can create the mutually beneficial partnership is to allow for the economic and trade openness but introduce a local content requirement on international goods. Local content requirements oblige firms manufacturing a good in a country to procure a specific minimum proportion of intermediate inputs domestically (Belderbos, Jie-A-Joen, & Sleuwaegen, 2002). Local content requirements may have favorable effects on the production of the intermediate sector, unemployment, and welfare (Yabuuchi, 2003). The local content requirements allow for local industries to protect their jobs and businesses even with the increased presence of international organisations in the industry. This can allow for strong relationships with international countries allowing for trade efficiency while also attaining local hardworking jobs and businesses. The process of local content requirements can also be used on local industries making sure that they are still using mostly local goods to produce their goods instead of potentially outsourcing most of the production to overseas markets and profiting off potentially unethical business behaviour by exploiting the cheap labour of underdeveloped

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