Political Arguments and Rationale Behind Trade Intervention

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Recommended: Differentiate between protectionism and free trade

The following essay aims at highlighting and analyzing the main political arguments for trade intervention and the rationale behind this. Firstly, what should be noted here is that international trade has been providing different benefits for firms as they may expand in different new markets and raise productivity by adopting different approaches. Given that nowadays marketplace is more dynamic and characterized by an interdependent economy, the volume of international trade has grown substantially in recent years, reducing the barriers to international trade. However, after experiencing the economic crisis that took its toll in 2008 many countries adopted a different approach in terms of trade barriers by introducing higher tariffs in order to protect domestic firms from foreign competition (Hill). Secondly, in order to better understand the implications of the political arguments for trade it is essential to highlight the main instruments of trade policy (See appendix 1). Political arguments for trade intervention are mainly concerned with protecting the interests of certain groups at the expense of other groups. Most of the time domestic firms benefit from this, while customers suffer the consequences. One of the most cited arguments for intervention is that of protecting jobs and industries from unfair foreign competition (Hill). While industries like aerospace are protected given their importance for national security, job protection appears as a result of unions and industries putting political pressure given the threat of more efficient foreign firms (Hill). Many countries achieve this by increasing the tariffs on imports of foreign products. What really happens when a certain industry is ... ... middle of paper ... ...tional Trade: New patterns of trade, production and investment. ,2nd ed., London: Routledge; Hill, Charles W.L. (2011) International Business: Competing in the Global Marketplace, 9E, McGraw-Hill Irwin. Krugman, Paul R. and Maurice Obstfeld (2003), International Economics: theory and policy, Addison-Wesley. Micik Mia (1998). International Trade. London: Macmillan Press LTD; Pomfret R. (1991). International Trade: An introduction to Theory and Policy. , Massachusets: Blackwell Powell, J.(1990) . Policy Analyis: Why trade retaliaton closes markets and impoverishes people, Cato Policy Analysis No. 143 . [Online], Available at: http://www.cato.org/pubs/pas/pa-143.html , Accessed 5.12.2013. Salvatore D. (2011). International Economics Trade and Finance. 10th Ed. John Wiley&Sons Pte Ltd. Sodersten B., Reed G. (1994) International Economics, 3rd Ed., London: Macmillan

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