The paper 'The Political, Economic, and Cultural Motives behind Government Intervention in Free Trade" is a good example of business coursework. There are many benefits associated with free trade. One of the benefits is the increase in competition to domestic firms that can lead to a decrease in prices of products. The domestic firms will also aim to increase efficiency and cut costs. Another benefit is the increase in exports for importing firms. Due to the low tariffs associated with free trade, firms can easily venture into new markets. Through free trade, surplus raw materials can be exported to other countries.
Lastly, there is the benefit of economies of scale that can lead to a reduction in prices (Howe, 2013). All the above benefits will ultimately be advantageous to the consumers. Despite the many benefits that can be associated with free trade, many governments still impose restrictions on it. The motives behind the restrictions are usually variable. Nevertheless, they can be categorized into three: political motives, economic motives, and cultural motives. The reasons for a particular government could be one or a combination of the three motives.
A detailed discussion of the three categories of motives will be done below. Most government motives are usually politically motivated. Policies that regulate trade are usually drafted based on either the personal motives of politicians or those of the political party. One of the main political motives for intervention is job protection (Vorton, 2010). Among the many benefits of free trade is the inflow of cheaper goods and services. However, many governments are usually of the opinion that though free trade helps grow the economy, it also leads to the collapse of industries that lack a competitive edge over the foreign markets.
The collapse of industries leads to job losses which could destabilize a country. The governments, therefore, move to protect jobs by imposing tariffs and quotas on imports as well as subsidizing goods and services from local industries. As an example, Russia upon joining the World Trade Organization did not abolish tariffs imposed on automobile imports but instead negotiated a reduction of such tariffs. It argued that the only reason behind this was to protect the jobs of Russian workers and industries (Fean, 2011). The second motive is to preserve national security (Vorton, 2010).
Many governments usually tend to protect those industries that are important to their national security. They offer financial assistance and low taxation especially to those companies in the defence industry in order to give them a competitive advantage in the market. They may also sabotage the efforts of foreign companies to enter the market by incriminating them with falsehoods. To preserve national security, governments impose restrictions on imports and/or exports. On imports, the governments ban imports of food supplies, medical supplies, among others in order to guarantee domestic supply.
Exports of goods related to defence and technological advancement are also restricted (Willett & Jalalighajar, 1983). An example of this motive is the recent ban of Huawei, a Chinese company, by the Australian government to participate in the $38 billion NBN tender (Wroe, 2012). The government claimed the company was a threat to national security. Another similar example is the declaration by the U. S.A. senate that the Chinese companies comprising of Huawei and ZTE pose a security threat.
The senate advised citizens not to enter into business with such companies (NCAFP, 2013). The two examples show just how many governments are always sceptical of those foreign companies that are owned by enemy countries. They feel that these companies are likely to carry out espionage on behalf of their governments.
Howe, A. (2013). FREE TRADE AND ITS ENEMIES. Victorian World, 108.
NCAFP. (2013). Cyberpower and National Security. American Foreign Policy Interests, 35(1), 45-58.
Melitz, M. J. (2005). When and how should infant industries be protected? Journal of International Economics , 66 , 177–196.
Fean, D. (2011, November 9). Can the W.T.O. Change Russia. Retrieved May 16, 2013, from New York TImes Website: http://www.nytimes.com/2011/11/10/opinion/can-the-wto-change-russia.html
Wroe, D. (2012, October 25). Huawei hits back at NBN deal rejection. Retrieved April 16, 2013, from The Sydney Morning Herald: http://www.smh.com.au/it-pro/government-it/huawei-hits-back-at-nbn-deal-rejection-20121024-2868u.html
Dorn, J. A. (2012). China Looms Large in US Presidential Campaign.
Soko, M., & Lehmann, J. P. (2011). The state of development in Africa: concepts, challenges and opportunities. Journal of International Relations and Development, 14(1), 97-108.
Braddock, D. (2012). Freedom, Oppression and Corruption in Sub-Saharan Africa. Southwestern Economic Proceedings, 33(6), 1-16.
Vorton, J. (2010, July 09). Why governments intervene in international business. Retrieved April 16, 2013, from Helium.com: http://www.helium.com/items/1873185-government-intervention-international-trade-business-political-economic-motives
Willett, T. D., & Jalalighajar, M. (1983). US trade policy and national security.Cato J., 3, 717.
Milner, H. V., & Yoffie, D. B. (1989). Between free trade and protectionism: strategic trade policy and a theory of corporate trade demands. International Organization, 43(2), 239-272.
Bai, C. E., Du, Y., Tao, Z., & Tong, S. Y. (2004). Local protectionism and regional specialization: evidence from China's industries. Journal of International Economics, 63(2), 397-417.
Nader, R. (1993). The Case Against Free Trade: GATT, NAFTA and the Globalization of Corporate Power An Earth Island Press Book (Vol. 49). San Francisco, Calif.: Earth Island Press.
Pauwelyn, J. (2010). Squaring Free Trade in Culture with Chinese Censorship: the WTO Appellate Body Report on China-Audiovisuals. Melb. J. Int'l L., 11, 119.
Pomeranz, K., & Topik, S. (2012). The World That Trade Created: Society, Culture, and the World Economy, 1400 to the Present. ME Sharpe Incorporated.