The paper "Motives behind Government Interventions in Trade" is a good example of business coursework. International free trade has been encouraged since World War II ended to foster economic welfare prosperity of nations. There have been efforts by the World Trade Organisation (WTO) and General Agreement on Trade Tariffs (GATT) to encourage free trade in the world. However, very few countries have adopted it. Hong Kong is the only port known to practise free trade in the world. The oil crisis, currency crisis, high unemployment, debt crisis and trade deficits have created a rising need to impose trade barriers as countries reel from the effects of such crises (Cherunilam, 2007).
This argument is also supported by Kyung-Hoon (2013) who acknowledges that the financial crisis of 2009 has pushed many developed countries to increase trade barriers as a measure of recovery. The developed countries are also aware of the success in the industrialisation of the developing countries and in retaliation; they are imposing non-tariff barriers such as health and safety regulations to counter an influx of imports from the developing economies. Though the World Trade Organisation has managed to have most countries partisan to it commit, there has been growing concern on its effectiveness to regulate manufacturing malpractices.
Kerr (2010) questions whether it is time countries rethought of the World Trade Organisation. Environmental lobby groups are also increasing the pressure on their governments to impose restrictions on countries that do not have good environmental practices. For these reasons, exclusive free trade has remained to be an elusive issue. Governments seem to always have reasons to justify their protectionism on the basis of genuine concerns or for selfish gain.
This paper provides an in-depth look into the motives behind government intervention in trade. It breaks down the motives into political, economic and cultural motives for a thorough understanding. Political motive Some governments will use trade barriers to gain political and commercial advantage over their competitors. History supports this mercantilism theory with countries such as Britain using India as their cheap labour market. Some analysts argue that trade-off between countries with almost the same commercial power is likely to cause conflict as opposed to those with a relative difference.
Therefore, some governments will use trade protectionism to gain leverage over their competitors (Hanson, 2010). Norway, for example, is a powerful political country in regards to fish exports within the EU. In 1966, they were able to escape the export dumping tariffs introduced by the EU after they imposed quotas on salmon food (Korneliussen & Blasius, 2008). Governments also argue that trade restrictions are essential for purposes of national defence. Lack of the capacity to produce essential military items predisposes the country to dependence on other countries for support.
This argument, therefore, necessitates many governments especially in the developed world to restrict trade. The economist Adam Smith, though a campaigner of free trade, is reported to have recognised the importance of this issue saying that defence is more important than opulence. Suppose a good can be locally made as opposed to exporting it and consequently raise the military presence, then a government will explore this option. A good example of this thought process is handling of the satellite launch pad by the United States of America.
The United States in 1986 depended on the foreign satellite launchpad that is credited to the accident of the Challenger Shuttle (Dunn, 2004).