‘Trade policy’ is a broad term used to explain how international business is regulated globally. Each nation has its own set of laws pertaining to its trade policy. These laws can vary heavily from country to country. In some countries, governments are actively trying to promote an open economy, seeking to remove any barriers to entry in international markets for their home grown businesses while also allowing overseas businesses into their own markets to encourage competition. However in other countries, governments put legislation in place which is highly restrictive on overseas businesses in order to preserve their home grown businesses. In this essay I will define ‘trade policy’ in high detail, discuss the different roles in which governments …show more content…
The main motive of trade policy is to ensure that a nation can trade internationally. Multiple nations can often work together to meet goals and benefit each other regarding imports and exports, whilst also protecting their own national industries (NZ MFAT, n.d.). Trade policy controls things such as tariffs, which are the taxes put on imports, and import quotas, which are limits on how much of a certain good can be imported into a country (NZ MFAT, n.d.). To boost trade, Free Trade Agreements (FTA’s) can be made. FTA’s are agreements between two or more nations which remove tariffs on certain products (NZ Customs Service, n.d.). This ultimately provides international businesses with a larger likelihood to succeed, as they can sell their products for more competitive prices in order to compete with home grown ones, providing less barriers to entry (NZ Customs Service, n.d.). While the most common focus of trade policy is international trade, the use of trade policy differs in many nations and in some instances, trade can be very restrictive. Trade policy plays a vital and important role in ensuring the success of a nation’s economic …show more content…
In my essay, I have given a detailed definition of trade policy and its different aspects; discussed inward and outward oriented trade policy and how these are executed by governments around the world; stated how I believe outward orientation is the most efficient role that government can play in trade policy. In the future, I recommend that governments around the world legislate extremely open policy. Specifically, I believe the New Zealand Government should continue to negotiate as many free trade agreements as possible, as well as continuing to work actively with the World Trade Organization, to help provide a world of open and free
The United States has for over two centuries been involved in the growing world economy. While the U.S. post revolutionary war sought to protect itself from outside influences has since the great depression and world war two looked to break trade restrictions. The United States role in the global economy has grown throughout the 20th century and as a result of several historical events has adopted positions of both benefactor and dependent. The United States trade policy has over time shifted from isolationist protectionism to a commitment to establishing world-wide free trade. Free trade enterprise has developed and grown through organizations such as the WTO and NAFTA. The U.S. in order to obtain its free trade desires has implemented a number of policies that can be examined for both their benefits and flaws. Several trade policies exist as options to the United States, among these fair trade and free trade policies dominate the world economic market. In order to achieve economic growth the United States has a duty to maintain a global trade policy that benefits both domestic workers and industry. While free trade gives opportunities to large industries and wealthy corporate investors the American worker suffers job instability and lower wages. However fair trade policies that protect America’s workers do not help foster wide economic growth. The United States must then engage in economic trade policies that both protect the United States founding principles and secure for tomorrow greater economic stability.
Free trade agreements are a group of countries that remove all trading barriers such as tariffs and quotas among them. Free trade agreements allow member countries to focus on exporting goods at which they hold competitive advantage and importing goods at which they have the competitive disadvantage, thus improving each country´s efficiency and enhancing overall economic welfare.
Arguments for government intervention in international trade take two paths: political and economic (Hill 2011, p205). Political intervention is concerned with protection of certain groups within the nation. These groups are usually the producers who have a lot to gain at the expense of consumers. On the other hand, economic arguments for intervention are concerned with increasing the wealth of the nation to the benefit of all i.e. producers and consumers. This paper discusses the arguments for the protectionist measures and the instruments governments apply in controlling trade and foreign direct investments. Firstly the instruments for trade policy available to governments are defined. The arguments for intervention are then looked at. Following this, the challenges and opportunities faced by international companies wishing to expand into these controlled markets are then analysed and discussed with examples. Finally conclusions are drawn from the analysis and recommendations made on multi-national strategies to adopt in harnessing opportunities availing.
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
What problem do trade agreements attempt to solve? An answer to this question is necessary to understand trade agreements. For years there was a consensus among economists that a trade agreement's fundamental role was to prevent the prisoner's dilemma that results from nations using trade policy to manipulate their terms of trade in their favor. But this consensus has been challenged by the possibility of other motives for trade protection that arise in the presence of imperfect competition. A government can also use trade policy to attract profits, employment, and firms within its borders. This variety of motives then raises the question of whether there exists a purpose for trade agreements distinct from that found in the perfectly competitive benchmark.
Trade liberalisation involves the removal of barriers to trade between different countries and encouraging the free exchange of goods between nations. This includes the removal or reduction of tariff obstacles, such as duties and surcharges, and non-tariff obstacles, such as licensing rules, quotas and other requirements. Most of the economic literature considers that trade liberalisation leads to an increase in welfare derived from an improved allocation of domestic resources.
...s cooperate on trade policy to help each other against the decrease of market access in a large market. The insurance motive for a country like the U.S is helpful because of the backdrop that small develop nations are increasing free-trade with bigger developed nations partners.
As Ian Fletcher pointed out in Free Trade Doesn’t Work: What Should Replace it And Why, nations need a well-chosen balance between openness and closure toward the larger world economy (Fletc...
International trading has had its delays and road blocks, which has created a number of problems for countries around the world. Countries, fighting with one another to get the better deal, create tariffs and taxes to maximize their profit. This fighting leads to bad relationships with competing countries, and the little producing countries get the short end of this stick. Regulations and organizations have been established to help everyone get the best deal, such as the World Trade Organization (WTO), but not everyone wants help, especially from an organization that seems to help only the big countries and those they want to trade with. This paper will be discussing international trading with emphasis on national sovereignty, the World Trade Organization, and how the WTO impacts trading countries.
The global economy needs free trade. Countries need free trade. Trade with other countries occurs at some level in every country globally. There may be some indigenous tribes within some countries that can lay the claim that they are self-sufficient, however, there is not a single country that can say the same. Proponents of an open trading system contend that international trade results in higher levels of consumption and investment, lower prices of commodities, and a wider range of product choices for consumers (Carbaugh, 2009, p26). Free trade is necessary. How do countries decide what to import and what to export?
The following essay aims at highlighting and analyzing the main political arguments for trade intervention and the rationale behind this.
”Free trade policies have created a level of competition in today's open market that engenders continual innovation and leads to better products, better-paying jobs, new markets, and increased savings and investment” (Denise Froning). Though Free trade plays a huge role in the economy today because of what and where it is used. Free trade allows for traders to trade across national boundaries and other countries without government interference. Meaning that traders have very few regulations that allow for them to do this without the government intervening. Free trade makes things for traders much easier and also allows for many more jobs in the US, such as exporting jobs, or jobs in the auto industry and plants. Though there are many other types of trade policies, none give more benefits than that of free trade. Free trade is not determined by artificial prices that may or may not reflect the true environment of supply and demand.
International trade is an economic practice where countries can import and export goods with no concerns to government intervention which includes tariffs and import/export bans or limitations. International trade has several advantages on developing countries; who are nations with low levels of economic resources or low standard of living. Developing countries can advance their economy through strategic free trade agreements. Free trade generally improves the quality of life of poor nations. Nations can import goods that are not easily available within their borders; importing goods may be cheaper for than trying to produce consumer goods. Many developing nations do not have the production procedures available for translating raw materials into valuable goods.
Free trade is a policy that relies on the concept of comparative advantage that when comparing two countries one of those countries will have the capability to make a product that is better than the other country. So it is best if each country focuses its efforts and resources into one product to increase the economic activity for both countries. The determination of who produces a product better is based on the open market without intervention from a government who may try to control a trade by imposing government protective measures such as tariffs. The World Trade Organization has been tasked with monitoring free trade, but it has been noted that their policing has not been effective to stop such interventions. Free trade not only relies on a laissez-faire approach but also on assumptions of conditions. The assumptions used by many for economic theories are not always accurate but rather the justification for using the assumptions is so that economic theories can be applied for the greater good of an economy.
In order for international trade to work well, governments must allow the world market to determine how goods are sold, manufactured and traded for all to economically prosper. While all nations may have the capability to produce any goods or services needed by their population, it is not possible for all nations to have a comparative advantage for producing a good due to natural resources of the country or other available resources needed to produce a good or service. The example of trading among states comprising the United States is an example of how free trade works best without the interve...