Government Intervention Of Trade Can Be Carried Out By Creating Various Rules

Government Intervention Of Trade Can Be Carried Out By Creating Various Rules

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Government intervention in trade can be carried out by creating various rules that will protect the interest of certain groups within nation normally producer at the expense of another group normally consumers. All forms of protection are intended to improve the domestic relative to foreign producers. This can be done through policies that increase the home market price of the foreign product, decrease the production costs of domestic firms, or restrict the access of foreign producers to the domestic market (Coughlin, Chrystal, & Wood, 1988). The first trade protection that government used is tariffs, which are taxes imposed on goods entering a country from abroad, resulting in higher prices and protect domestic producers. For example, India’s Food Minister raise import tariff on sugar to 40% in order to slow the flow of inexpensive imports into its market. Indian sugar currently costs 40 rupees per kilogram, while import sugar costs 33 rupees per kilogram, which is cheaper for the Indian customers (Nayak, 2014).

One of the main purposes of this protectionism is protecting job inside the country. It is indisputable that the rate of unemployment will have an impact on government. Government will directly interfere in trade by increasing the level of tariffs, adopt import quota and any other policies (Nozick, Anarchy, State, Utopia, &Vallentyne, 2006). For example, The US imposed tariffs of 35% on imports of Chinese passenger and light truck tires because Chinese tire exports that has rocked the domestic US tire industry and displaced thousand of jobs (Weisman, 2009).

Another form of protectionism is antidumping policies. Government using antidumping policies to punish foreign firms and protect domestic producers from unfair for...

... middle of paper ...

...ilip , 2011). All these forms of protectionism designed to collect revenue for the government and protect domestic industries against foreign competition and customer are the one who needs to bear the cost (Ma, 2011).

Just like a coin, a government intervention to have a double side to it. For example, in order to protect domestic auto industry, government of Thailand has levied high import duty and taxes to all imported cars. Consumer in Thailand needs to pay B2.2 million for the new Mini Cooper while it costs around B800, 000 bath in the UK for the same model (the phuketnews , 2014). Thus protect industry argument clashes with protecting consumer argument as tariff barriers penalize consumers. The losers of this international game are customers that are literally being robbed through taxes and higher prices (Block, 1998).

However, there is an economic argument w

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