19th April, 2013.IntroductionFree trade seems to have many advantages as well as merits for a nation and the nation’s economy. Free trade can lead to competitive economies which will lead to lower prices of goods. On the other hand, governments may at times implement quota and at time raise taxes so as to prohibit export and import. Contrary governments may also be aimed at protecting their young and emerging industries. The questions that linger in most peoples' minds is the reason why governments tend to intervene in trade and yet free trade seems to have numerous advantages.
This paper analysis the economic, cultural as well as the political reasons why the government intercepts in trade. Broadly, there seems to three parts that make up the reasons. This paper will be therefore divided into three main parts. The first part will deal with the political reasons and it will aim at discussing how they have an influence on the decisions that the government make. The paper will also discuss the cultural as well as the economic motives and discuss how the governments have an influence and make decisions on intervention.
DiscussionGovernments mainly impose restrictions when it comes to free trade and this is mainly based on three major restrictions and they include economic, cultural and political reasons and at times a combination of all the three factors. On various occasions, governments tend to intervene in trade in instances when they offer the required level of support to the domestic businesses exporting activities (Badrinath & Wahal, 2002). Additionally, governments may at time find it necessary to intervene during the hard economic times or in times when workers are taking actions and they are lobbying their government to reduce the level of imports.
Political motivesThe government of a country tends to make decisions that are related to trade based on various political motives. This is mainly based on the fact that those seeking elective posts will mainly be aiming at pleasing the voters and thus they may be aiming at being re-elected. In most instances trade policies that are purely driven by the political reasons seems to be wiser at the end (Barberis & Shleifer, 2003).
The political system of a country can be classified as being the country's system of government. Through the political system of the country an individual can be able to come with the major characteristics of that country. A number of scholars are of the view that the country political system ought to be viewed from two major perspectives. With the first one being based on the level in which a country's government is able to emphasize on collectivism over the notion of individualism (Lehne, 2006). Thus the political system can be divided into two broad categories that is: individualism and collectivism.
The core political motives of the government intervention in trading activities may include but are not limited to job protection, preservation of national security, response to other countries unfair and unjust trade practices and also gaining power over other countries (Bhanot & Kadapakkam, 2006).