IntroductionFree trade is a scenario whereby exports and imports occur without trade barriers. Free trade has numerous benefits but governments usually have continued to intervene in trade of services and goods. Therefore, why do governments impose conditions on free trade? Three important factors associated with intervention of the governments, which include economic, political and/or cultural reasons or sometimes a combination of these three factors. Numerous governments usually support the operations of domestic markets with the aim of exportation. Therefore, the aim of this paper is to analyse government interventions to free trade; from the perspective of political, cultural and economic reasons.
Political reasonsPolitical motives usually direct government officials in making decisions, which are related to trade (Sally, 2008). The aim of political branch of a government is pleasing the voters with the aim of retaining power for a longer period (Coyne, 2008). One of the major reasons why government intervention is important is protection of jobs. High rates of unemployment are a threat to a governing power and it is important to ensure low rates of unemployment are maintained (Bissa, 2009).
This means that governments are involved in intervention of trade to prevent threats to jobs at home. For example, the government of Guyana in South America advocated for local goods and services since foreign goods and services do not mean the products and services are better (Sinha & Sinha, 2009). In the same way, the government of China countered the effect of Kodak because it was eroding the market of China Lucky Film (Gruhl, Comer & Rigdon, 2009). The government of China restricted the proposed joint venture and the government loaned $240 million to rescue the falling Lucky.
These examples illustrates governments go an extra mile to ensure local population have access to jobs. Preservation of national security is another aspect, which governments aim to achieve because of their interventions in trade. Those industries viewed by the government has important to national security usually are protected (Rosati & Scott, 2011). The government can control some imports such as fuel, weapons and sea, land and air transportation (Adekola & Sergi, 2007). For example, the United States government has continuously searched for oil within her borders because disruptions from outside may prevent the flow of oil (Gruhl, Comer & Rigdon, 2009).
Other countries such as France are providing subsides to local population to be able to produce agriculturally more (Bissa, 2009). Conversely, restrictions on importation may make some products more expensive compared to importing. Apart from importing, some governments usually restrict exportation because of national security (Grimwade, 2012). The government can burn those products and technologies, which have dual uses; they can be utilised either military or industrial at the same time (Nelson, 2008).
This phenomenon was common in the Cold War era where Soviet Union were in conflict with Western countries especially United States. Gaining influence is another factor in which governments usually intervene in trade. The influence is usually utilised by bigger nations to influence the smaller nations (Rosati & Scott, 2011). For example, Asian countries have presences in both export and import industries and Japan has better influence compared to other countries. The government of Japan, because of superiority, has continuously assisted countries within the region financial to recover from challenges associated to financial crises (Gruhl, Comer & Rigdon, 2009).
The aim of the Japanese government is to generate goodwill among her neighbours through these deals. In addition, the government of United States has utilised similar strategy and have entered into understanding with North, South and Central America (Bissa, 2009). However, the same government has banned trade with Cuba to influence on internal politics. Therefore, numerous countries usually utilise trade as a means of gaining influence based on governmental expectations.