The Political, Economic and Cultural Motives behind Government Intervention in Trade - Coursework Example

The Political, Economic and Cultural Motives behind Government Intervention in Trade Name of Student Student Number Institution Course Code Name of Lecturer Submission Date The Political, Economic and Cultural Motives behind Government Intervention in Trade Trade barriers have considerably reduced since the World War II, although governments globally have continued to restrict free trade across its borders. Free trade refers to the state of trading without any imposed barriers by the authoritative bodies (Krugman and Robin, 2006). The last half of the 20th century and the last decade of 21st century has experienced considerable trade cooperation, changes in border interventions and reduction of tariffs to conduct business among nations (Krugman and Robin, 2006). The trade issues have formed critical debates even in the political arena due to the stake of the national economy in regard to international trade. A good example is the Australian 2007 national campaigns that saw trade policy emerging as a contentious issue for discussion (Ravenhill, 2008:121). Notably, there have been measures to create trading blocs bringing up regional countries with specific interests like the European Union. The European nations have used considerable resources to foster their economies with the packages introduced being at the national level rather than at the EU level (Hilton, 2003). However, there are still government interventions controlling the trading operations within and beyond the national borders. In context, there exist political, economic and cultural motives by the respective governments in their interventions to trading activities. This essay evaluates the motives in respect to various challenges and hindrances encountered by traders. The motives will be discussed as stated elaborating on each and every one, giving its benefits to the nation and impending barriers with reference to various international states. The political motives by government in their interventions to trading activities are aimed at safeguarding a number of aspects in the process (Krugman and Robin, 2006). First is the protection of jobs with respect to ensuring unemployment is not raised on the fact of trade threatening jobs at home. Further, the preservation of national security in respect to importation and export of goods is critical pertaining to what is brought into or out of the country (Hilton, 2003). The propagation of preferential trade agreements (PTAs) in the Asia Pacific region can be termed as a realistic response by national governments to enhance regional and multilateral trading relations (Ravenhill, 2008). On evaluating the PTAs, it is clear to note that the main focus is entrenched on the trading and economic dimensions. However, there have been little discussions and evaluations on the geo-political and strategic dimensions of preferential trade agreements within the Asian region (Lloyd, 2004). The industries that are critical for national security get protection sponsored by the national authorities in regard to both imports and exports (Deardorff, 2000). The national defence and other noneconomic considerations bring about interventions by government officials to safeguard their interests. Industries producing items of defence ought not to be driven out of market via international competition; this makes the government intervene in such cases as a noneconomic venture to safeguard a given industry (Wild, et al. 2010:179). However, there could be large numbers of industries to which protection could be extended. For example, United States restricts the importation of species termed as endangered due to reasons that are not economical (Wild, et al. 2010:195). Consequently, the World Trade Organization has banned the importation or exportation of parts of endangered species like elephants and rhinoceros tusks to protect nature and wildlife tourism industry (Krugman and Robin, 2006). The government of a nation restricts goods being brought into the country to ensure that domestic supply is safeguarded resulting to preservation of national security (Doole and Lowe, 2004). In context to agricultural sector, countries intensely safeguard it for food security as it is a national security concern with respect to a nation that import food supplies that would end up facing state of starvation as a result or war (Keech and Munger, 2012). In respect to exports interventions, the governments have national security motives leading to ban of given defence related goods from export to other nations. One notable aspect concerns the export of technology or products of dual usage (Wild, et al. 2010). Such requests are thoroughly viewed with products of dual uses meaning, items having both industrial and military applications. The third political motive by government in respect to trade interventions regards to response to unfair trade (Krugman and Robin, 2006). Arguments have been made pertaining to the sensibility behind government allowing free trade if others fail. It is normal to find authorities threatening to close ports or imposing high tariffs whenever another country fails to concede on given trade issue. Finally, the last motive for discussion in political context regards to gaining of influence. Government within the largest nations may participate in trade affairs to dominate and gain influence on smaller nations (Wild, et al. 2010). For example, the US being a large economic and political nation continues to show interest in dominating and controlling over Central, North and South America, as well as the Caribbean basin. The economic motives constitute safeguarding the economic front within the given country. First, the motives aim at protecting young and growing industries from international competition (Krugman and Robin, 2006). Infant industry argument goes that upcoming industries require protection from international competition in the course of their development up to that time when they are well established to compete effectively (Wild, et al., and 2010:180). The protection manned can be removed later after the industries acquire necessary knowledge to become innovative, efficient and competitive. However, there exist hindrances towards the recognition of industries that are worth protecting and those that are not. The measure of protection can bring about complacent growth among local firms in regard to innovation leading to limited competitive vigour, thereby increasing consumer price (Wild et al., 2010). The second government policy pertains to pursuing strategic trade policy. According to Deardorff (2000:5), when a national economy competition becomes perfect, and the entire costs and benefits reflected in market prices, government interventions are not really necessary unless for purposes of distribution. In regard to economic motive by the authorities, pursuing strategic trade policy is critical. In context to trade theorists, they believe that government interventions are crucial in helping firms take advantage of the economies of scale and enjoy the first mover advantages. The first mover advantages come as a result of economies of scale limiting the magnitude of companies in a given industry (Wild, et al. 2010:181). The economic interventions benefit the companies to earn profits whenever they gain the first mover advantages and solidified market positions. A good example is the South Korean chaebol form of business conglomerate in Asia that helped companies to survive the poor economic dispensations due to the various industries present for competition. In context, it is critical to state that policies at the time brought about spin off effects on industries like transportation (Wild, et al. 2010:182). One of the hindrances attached to this context pertains to inefficiency and high costs within the South Korean and Japanese companies in the late 1990’s as a result of government assistance to local companies. It is crucial to note that the support from government is vulnerable to political lobby, and special groups of interest may end up benefiting at the expense of the customers (Capling, 2008). However, it is also critical to note as asserted by Lloyd (2004:44) that there exists no clear single example globally of an economic development in the past having successful growth development of its economy realised without the protection and assistance of the national government. Looking at the Asia pacific relations, the Australia-Japan trade relationship has brought critical and lasting importance to both countries for the past decades since 1957 (Capling, 2008:29). The removal of discrimination among Japanese commodities by Australia also saw Australian commodities finding their way into the Japanese market. The treaty brought about rapid growth of two-way trade dislodging Britain from its dominance in the Australian market (Capling, 2008:29). Japan still holds its position in Australian market with the trading relation being characterised by a high degree of complementation. This is where Japan which is poor in resources relies on Australia as a critical source of raw materials and Australia in return gets manufactured goods, components, and foreign investment from its trading partner, Japan (Capling, 2008). The importance of Australia to Japan is profound as a critical source of raw materials and energy. 60% of coal and iron ore imports used in Japan comes from Australia alongside other critical energy sources for industrial production (Capling, 2008). Government interventions are also aimed at solving arising crisis that may affect the national economy. This is realised through creation of policies that are aimed at protecting the local firms in given circumstances or even creating new industries (Krugman and Robin, 2006). For example, in regard to safeguarding products within the country from getting unrivalled competition, the national government introduces higher tax rates to ensure its local products gets precedence locally against the international ones (Doole and Lowe, 2004). It is evident that credible signals emanating from the government can be crucial in the creation of a positive market outcome. This would result in promotion of economic growth and safeguard the interest of a nation. Therefore, government intervention to trade hindering full realization of free trade is mainly aimed at promoting and safeguarding national economy through strategic measures and policies (Deardorff, 2000). Introduction of quota systems is crucial within the domestic industry as it enables more production and eventually higher price of commodity is achieved relative to the free trade equilibrium (Keech and Munger, 2012). This results into greater employment in the industry although with a disadvantage of consumers paying higher prices lowering the consumption ability of the commodity. With foreign producers, they receive higher price although produce less with a quota than under free trade (Ravenhill, 2008). Government intervention to trading practices protects given industries from foreign competition. A company not able to compete with international companies may impact on wages and employment (Krugman and Robin, 2006). In such circumstances, the government will impose restrictions to products competition with those of the industry to safeguard its citizens from unemployment. Looking at instances of government favouring unrestricted trade, they do so for short terms to allow the given industry to adjust to the prevailing circumstance (Capling, 2008). In context, with low prices on imports, local workers tend to lose their jobs raising the level of unemployment. The national economy mainly benefits wholly from low prices and enhanced quantity of goods. Culture motives by government interventions pertain to the ensuring the exposure brought up by imported products to the locals does not pose a challenge of eroding the country’s culture (Wild, et al. 2010:182). The emergence and development of unwanted cultural influences cause great distress and make a government to ban given imports. Most countries restrict trade of goods and services perceived to gain cultural objectives mainly in regard to protecting the national identity of the given nation (Krugman and Robin, 2006). Culture and trade have a direct relation and they considerably influence each other to greater extents (Wild, et al. 2010:182). National cultures get altered gradually on exposure to the people and products possessing foreign cultures. This brings in even unwanted cultures that may influence the nation negatively leading to great national distress and the result is government blocking importation of such products and services perceived harmful. Majority of countries have laws and regulations protecting the media industry and in specific its programming for cultural reasons, for example, the French authorities have a ban on foreign words on radio and TV (Wild, et al., 2010:182). The law in France bans words from foreign language to be used virtually in all business and government communications, public announcements, and advertising information, and encourages the use of French alternatives whenever available. Globally, the United States is perceived and viewed as a threat to national cultures due to its international capacity to influence consumer goods entertainment and media (Wild, et al., 2010:182). With this regard, the theory of international trade meets the reality of international context. Due to the rhetoric of protectionism tending to acquire profound public support, the local producers of local competing products find it an advantage to join in the advocating for government intervention for protection to safeguard them from being driven out of market (Keech and Munger, 2012). Canada is another known country in respect to its attempts to mitigate the cultural influence of entertainment products coming from the US. The country requires any music played over Canadian radio to consist of at least 35% Canadian artists (Wild, et al., 2010:182). Notably, majority of nations are taking into consideration laws to safeguard their media programming for cultural reasons. The main setback with the restrictions is that they tend to minimise products selection that are availed to customers (Krugman and Robin, 2006). This eventually constricts the satisfaction of wants to given products and services as regulated by the government. The English language has been claimed to influence other culture through international trade (Wild, et al., 2010). International trade of all sorts of goods and services is exposing majority of globally to new ventures, cultures, beliefs, ideas, products and ways of life. However, with growth and continuity of international trade, majority of governments are trying to limit the potential adverse effects on their respective cultures and economies. In conclusion, despite the theoretical benefits associated with trade, nations fail to embrace free trade leading to controlled business operations that cannot realise great growth. This essay has clearly evaluated the reasons behind national government restricting trade and not allowing free trade in order to safeguard their industries and national economy, as well as maintaining their cultural values. These are entrenched in the political, economic and cultural interests guiding the motives behind the government restrictions of free trade. References Capling, A. (2008). Preferential trade agreements as instruments of foreign policy: an Australia- Japan free trade agreement and its implications for the Asia Pacific region, the Pacific Review, 21(1):27-43. doi.org/10.1080/09512740701868765. Deardorff, A. V. (2000). The economics of government market intervention, and its international dimension. Paper prepared for a festschrift in honor of John H. Jackson. B. Bronckers and R. Quick (Eds.). Kluwer Publishers. Doole, I. and Lowe, R. (2004). An introduction to international marketing, in international marketing strategy, 4th ed. London: Thompson Publication Services. 2-34. Hilton, T. (2003). International negotiations on investments liberalization 1, Australian Journal of International Affairs, 57(2):253-258. doi.org/10.1080/10357710301748. Keech, W. R. and Munger, M. C. (2012). Market Failure and Government failure, Paper submitted to public Choice World Congress, 2012, Miami. Public Version 1.0-2-27-12. Krugman, P. and Robin, W. (2006). Macroeconomics. New York: Worth Publishers. Lloyd, C. (2004). AUSFTA as free trade imperialism, the regionalization of all Australia. Dissent: spring. 44-47. Ravenhill, J. (2008). Preferential trade agreements and future of Australia trade policy, Australian Journal of International Affairs, 62(2):121-128. doi.10.1080/10357710802060501. Wild, J. J., Wild, K. L., Man, J. C. and Rammal, H. G. (2010). International business: the challenges of globalization. Business-government trade relations. Australia: Pearson Education. Read More