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. IntroductionGlobalization 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 MotivesPolitical 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 JobsUnemployment 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).