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

Even though the world, since WW II, has witnessed great reductions in trade barriers, governments everywhere continue to restrict free trade. Discuss the political, economic and cultural motives behind government intervention in trade. Name of Student : Name of Instructor: Name of the Course: Code of the course: Date of Submission: Even though the world, since WW II, has witnessed great reductions in trade barriers, governments everywhere continue to restrict free trade. Discuss the political, economic and cultural motives behind government intervention in trade. Introduction Globalization has led to an increased trading activity between borders (Wild & Wild, 2012, p.6). International trade is marked with reduced trade barriers. In the last century, there was an increased development of trading blocks and unions in the world. Generally, all the blocks and unions aim at increasing international trade by reducing trade barriers (World Trade Organization, 2013, p.1). After the Second World War, globalization started to take effect on an increased scale, with the formation of the United Nations being the initial move by world leaders to unite the divide world. In the modern world, there are even regions which use a common currency in trade for instance the Euro zone, with an aim of reducing the exchange barriers in trade. Even though the world, since World War II, has witnessed great reductions in trade barriers, governments everywhere continue to restrict free trade. Government regulation of trade is normally based on political, economic and cultural objectives (Schepers, 2010, p.465). governments may regulate trade with an aim of either promoting or restricting it. Governments promote trade by the use of subsidies, export financing, establishing foreign zones and using special government bodies to promote trade. Ways in which governments restrict trade includes using tariffs, quotas, controlling the currency, delays in administration, embargoes and the enforcement of local content requirements. The following paper will discuss the political, economic and cultural motives behind government intervention in trade. Political Motives Political motives form the major causes of government intervention in trade. On this point, it is important to acknowledge that politics play a very important role in trade. Owing to the great influence which trade has on the lives of people, governments normally try to regulate it, with an aim of ensuring that the general welfare of the population is taken care of (Abbas, 2008, p.2). The political motives behind governments’ regulation of trade include protection of jobs, preservation of the national identity, influencing other countries and responding to unfair or fair trade policies by other trading partners. Protection of Jobs Unemployment is a major problem in many economies in the world. Ideally, an economy which is doing well is most likely to have the minimum levels of unemployment. In addition to this, unemployment is a major factor which influences the kind of lifestyle lived in a country. The more the number of unemployed people, the higher the number of dependants which ultimately translates to a negative influence on the economy. For this reason, governments are normally focused on job creation. International and domestic trade has a capability of increasing employment positions in the market. This explains the reasons as to why governments use trade promotion strategies to encourage trade in their countries (Pearson, 2010, p.8). Some of the ways of doing this includes provision of low cost capital, subsidies, and reduced taxes. On the other hand, international trade has the ability to reduce employment positions in a domestic market. In such scenarios, governments establish trade restrictions with a view of protecting jobs in the domestic market (Agrewal, 2009, p.125). An example of government regulation is the $240, 000,000 funding of Chinese Lucky Film in order to enable it compete with Fuji and Kodak which were threatening to outdo Chinese Lucky, which would ultimately lead to loss of employment (Anonymous, n.d, p.126). Preservation of National Security Security is also an important element in the political world. Basically, a political system is effective in protecting the subjects/ electorate if it is able to offer them security against various threats. This explains the reason as to why governments regulate trade so as to protect the industries which are deemed crucial to a nation’s security. On this point, it can be appreciated that the regulations on exports and imports is the most widely used tool in preserving national security (Agrewal, 2009, p.126). With respect to exports, governments usually ban/ regulate the importation of products which are considered as threats to the national security. Some of these products may include weapons, transportation means and fuel. Examples of these regulations includes the travel bans which national authorities normally give in order to protect their nationals and nation from security threats for example terrorism, the regulation of oil importation owing to its importance on a country’s economy and the regulation of the importation and exportation of weapons in order to preserve a country’s security. With respect to exports, governments normally regulate the exportation of specific products which are considered vital to a country’s security (Anonymous, n.d, p.126). An example of this is the banning of the exportation of game trophies in countries which are endowed with wildlife is an act of protecting the animals from poaching. The banning of the exportation of dual use products during the cold war in the Soviet Union is also an example of government regulation of trade with an aim of preserving the national economy. Achievement of Political Influence Governments also regulate trade in order to gain political influence in other countries. This is a common trend in the big economies/ countries who aim at gaining political influence in small economy countries (Anonymous, n.d, and p.127). A perfect example of this trend is the action by the United States of America to support Japan after the Second World War in order to gain a political influence over it. At the specific time, the world was torn between communism which was fostered by the Soviet Union and capitalism which was fostered by USA. Currently, the USA, Britain, China and Japan among other major economies engage with poor countries in Asia, Africa and South America with an aim of gaining a political influence over them. Responses to Other Countries Trade Policies Governments also regulate trade in order to respond to unfair or fair trade policies by other countries. On this point, it can be appreciated that one good turn deserves another good turn. Therefore, governments normally establish trade promotion policies in order to fit into a trading union where the members encourage free trade. On the other hand, governments also regulate trade in order to respond to unfair trade policies by their trading partners. This is done in order to ensure that other countries do not benefit unjustly from the benevolence of the trade legislations is a country (Wild & Wild, 2012, p.26). This is normally a phenomenon that leads to the falling of many trade unions. Economic Motives Governments also engage in trade regulation so as to influence the economy (World Trade Organization, 2013, p.1). Generally, every government has the improvement of economy on its core objectives. For this reason, governments usually engage in various measures aimed at ensuring that they are able to create sustainable economies. One of the ways of doing this is by regulating trade. The government is able to influence the economy by the use of trade regulation by the use of the following two strategies; the protection of infant industries and embracement of strategic trade policies (Anonymous, n.d, p.176). Protection of Infant Industries Governments usually engage in trade regulation with an aim of protecting infant industries. Infant industries are developing industries. In fact industries are normally prone to bottle neck competition from global industries which are already established. On this notion, governments usually aim at protecting the merging industries from the global competition up to a point where they are considered fit to compete on a global platform (Anonymous, n.d, p.177). However, protection of developing industries should be done strategically, so as to ensure that it does not translate to hampering growth of an industry with respect to the global standards. The government must put in place an ideal mechanism which would be used to identify specific industries which need government protection and also one which does not hinder innovation; hence enabling the infant industries to grow to global standards. Strategic trade Policies In the wake of increased competition and the need for sustainable economies, there has been the need to embrace strategic management and planning in all aspects of the economy. This explains the reason as to why governments engage in trade regulation, a very important economic activity, with an aim of establishing and developing strategic trade policies (Vorton, 2010, p.1). The aim of strategic trade policies is to place a country at a competitive advantage over its competitors in the global market. An example of the efficiency of strategic trade policies its effects in Korea. It is believed that the strategic trade policies which were put in place by the government for instance in the shipbuilding industry enabled the country to develop chaebol, conglomerates which have the ability to give the country a competitive edge over its competitors. Cultural Motives Governments also engage in trade regulations with aim of protecting their culture. On this point, it is important to acknowledge the fact that various countries have various cultural perspectives and preferences. One of the main objectives of the government is to protect the culture of its people. Governments are able to do this by the use of several strategies including; Blocking the Importation of Products Which Are Deemed Harmful The major type of product which countries block from their countries is entertainment products. Entertainment comes in form of books, videos, movies, music among others. Ideally, entertainment has a very big influence on a specific culture. It has the potential to dilute the values, behaviors and perceptions which are upheld by a specific culture. For this reason, governments usually regulate trade of entertainment products with an aim of ensuring that cultures in their countries are not influenced negatively. On this point, it is important to bring into the light the United States entertainment industry, which is the biggest in the world. Various countries in the world have blocked entertainment products from the US due to its influence on the dilution of national cultures (Anonymous, n.d, p.180). For instance, the Canadian government directs that 35 percent of the music played in its airwaves should be of Canadian origin, which ensures that its culture is not impacted negatively by the American culture (Anonymous, n.d, p.180). The Jamaican music industry is also an example of an industry whose imports in other countries is regulated heavily. This is owing to the gangster and dirty lyrics which are associated with some of its music products. The French government is also very sensitive about is language. It engages in trade regulation, mostly on written works, so as to ensure that its language is free from foreign words (Anonymous, n.d, p.180). Lastly, it should also be acknowledged that the Great Wall of China, a major landmark in the world, was constructed with one of its objectives being the protection of the Chinese culture from foreign influences. This further enables a country to protect its national identity. The World Trade Union The world trade union is an international organization which is responsible for establishing and enforcing trade regulations in the world. The main objective of the WTO is to ensure that there is free trade in the world (World Trade Organization, 2012, p.5). It engages with governments in order to reduce trade barriers; hence realizing of global trade. Other major trade organizations include the European Union, OPEC and ECOWAS amongst others. Government regulation on trade is good. However, it should be done strategically so as not to lead to overregulation which is harmful to trade. Conclusion In conclusion, this essay has been successful in discussing the govern motives in regulating trade. The motives can be divided into political, economic and cultural motives. With respect to the political motives, it has been seen that governments regulate trade in order to protect employment opportunities, enforce national security, and achieve political influence over other countries and respond to unfair or fair trade practices by other countries. Economic motives are associated with the protection of infant industries from global competition and the development of strategic trade policies. Cultural motives are geared towards ensuring that the national cultures are not affected negatively by foreign cultures. Governments do this by blocking foreign materials, especially entertainment products. The essay has also given examples on several trade regulation practices by several governments in the world. From this essay, it can be acknowledged that government regulation of trade is good if it is done with the right intentions. However, governments should ensure that they do not over regulate trade since it affects it negatively. From the essay, it can be concluded that the motives of governments in regulating trade are political, economic and cultural. References Abbas, A., (2008). Globalization: where do we go from here?, International Journal of Commerce and Management, 18(4);1-7 Agrewal, R.,(2009). International Trade, Excel Books India Anonymous, (n.d). Chapter 6. Business Governments Trade Relations, Retrieved on 22nd April 2013 from < http://www.usheproduction.com/design/8020/downloads/15.pdf> Pearson, (2010). Business – Government Trade Relations, Pearson Education Inc Schepers, S., (2010). Business-Government Relations: Beyond Lobbying, Corporate Governance, 10(4); 475-483 Sgro, P., (2009). International Economics, Finance, and Trade. International Economics, 1(1); 1-8 Vorton, J., (2010). Why Governments Intervene in International Business, Retrieved on 22nd April 2013 from < http://www.helium.com/items/1873185-government-intervention-international-trade-business-political-economic-motives> Wild, J., & Wild, K. (2012). International business: The challenges of globalization (6th ed.). New Jersey: Pearson. World Trade Organization, (2012). C. Causes and Effects of PTAs: Is It all About Preferences, World Trade Report, 1-30 World Trade Organization, (2013). The Regulation of State Trading under the WTO System, Retrieved on 22nd April 2013 from Read More