National Trade policies

National Trade policies

1. Issues on Trade Intervention

   • Should a national government intervene to protect the country’s domestic firms by taxing foreign goods entering the domestic market or constructing other barriers against imports?
   • Should a national government directly help the country’s domestic firms increase their foreign sales through export subsidies, government-to-government negotiations, and guaranteed loan programs?

2. Free Trade or Fair Trade

   • Free trade –minimal influence from government
   • Fair trade – active intervention from government (managed trade)

3. Industry-Level Arguments

   • National Defense Argument Infant Industry Argument Maintenance of Existing Jobs Strategic Trade Theory

4. Infant Industry Argument

   • Imposition of tariffs to give U.S. firms temporary protection from foreign competition until firms are fully established Powerful economic development strategy

5. Objectives of Unfair Trade Practice Laws

   • Promote global efficiency by encouraging production in those countries that can produce a good most efficiently Ensure that trade occurs on the basis of comparative advantage, not the size of government subsidies Protect consumers from predatory behavior

6. National Defense Argument

   • Country must be self-sufficient in critical raw materials, machinery, and technology or else be vulnerable to foreign threats Appeals to general public
   • Protects steel, electronics, and machine tools industries, and merchant marines