In this chapter, you will learn to: Identify the policy instruments used by governments to influence international trade flows, understand why governments sometimes intervene in international trade, summarize and explain the arguments against strategic trade policy, describe the development of the world trading system and the current trade issue, explain the implications for managers of developments in the world trading system. | International Business 9e By Charles . Hill McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7 The Political Economy of International Trade What Is The Political Reality Of International Trade? Free trade occurs when governments do not attempt to restrict what citizens can buy from another country or what they can sell to another country many nations are nominally committed to free trade, but intervene to protect the interests of politically important groups How Do Governments Intervene In Markets? Governments use various methods to intervene in markets including Tariffs specific tariffs ad valorem tariffs Subsidies Import Quotas tariff rate quotas quota rent LO1: Identify the policy instruments used by governments to influence trade flows. How Do Governments Intervene In Markets? Voluntary Export Restraints Local Content Requirements Administrative Polices Antidumping Policies aka countervailing duties dumping Why Do Governments Intervene In Markets? There are two main arguments for government intervention in the market Political arguments - concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers) Economic arguments - concerned with boosting the overall wealth of a nation – benefits both producers and consumers LO2: Understand why governments sometimes intervene in international trade. What Are The Political Arguments For Government Intervention? Protecting jobs - the most common political reason for trade restrictions Protecting industries deemed important for national security - industries are often protected because they are deemed important for national security Retaliation for unfair foreign competition - when governments take, or threaten to take, specific actions, other countries may remove trade barriers Protecting consumers from “dangerous” products – limit “unsafe” products What Are The Political . | International Business 9e By Charles . Hill McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7 The Political Economy of International Trade What Is The Political Reality Of International Trade? Free trade occurs when governments do not attempt to restrict what citizens can buy from another country or what they can sell to another country many nations are nominally committed to free trade, but intervene to protect the interests of politically important groups How Do Governments Intervene In Markets? Governments use various methods to intervene in markets including Tariffs specific tariffs ad valorem tariffs Subsidies Import Quotas tariff rate quotas quota rent LO1: Identify the policy instruments used by governments to influence trade flows. How Do Governments Intervene In Markets? Voluntary Export Restraints Local Content Requirements Administrative Polices Antidumping Policies aka countervailing duties dumping Why Do .
