Political, Economical and Cultural Incentives for Trade Restriction Are Evaluated to Exam a Nations Reasons for Imposing Various Policies, Regulations, Red Taps and Paperwork in Cross-Border Trading
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Executive summary
Even with mature objective conditions (technology availability) and substantive subjective efforts (agreements announced by GATT, WTO and the World Bank) in free trade, government bodies are still taking delight in setting up various trading barriers such as tariff, subsidy and “green-trade” barrier, disregarding free markets contributions to peoples living standards according to theory of absolute advantage and comparative advantage.
Actually, from governments point of view, certain degree of trading restriction should be necessarily maintained to safeguard national security, protect domestic industry and preserve cultural identity.
On this essay, political, economical and cultural incentives for trade restriction are evaluated to exam a nations reasons for imposing various policies, regulations, red taps and paperwork in cross-border trading.
Accordingly, it is concluded that concerns for political power and state safety is the principal, fundamental and ultimate reason for setting up various trade restrictions. Due to the fact that government bodies are main regulator and enforcer of trade barriers, it is reasonable to state that trade barrier has been utilized as a political tool by political parties to favor one country over another. Also, international business or trade surplus is what developing countries pursue for rapid economic growth and then stronger political power at global stage. For developed countries, they are more concerned with economic control policies to avoid emergence of speedy pullulating of conflictive political system. Even in terms of cultural aspect, trade barriers do effectively prevent the cultural aggression of hegemonic countries such as United States. Definitely, there are political misgivings behind foreign policies.
Consequently, the government is well advertised to balance between protectionism and deregulation regarding international business. In other words, trade restriction towards certain sensitive goods such as food, arms should be preserved for national safety purpose. Meanwhile, reduction in trading barriers contributes to innovation and strong rivalry in the long run.
Introduction
Along with the trend of globalization after World War II, international business has been amazingly proliferated, which ought to be greatly attributed to the advocating of free trading by various organizations such as GATT (General Agreement on Tariffs and Trade), WTO (World Trade Organization) and a lot of Regional Trade Agreements. Also, the advance in communication technology and transportation facilitate the flow of products and market expanding. Undoubtedly, numerous benefits are brought about by global trading. For example, organization in developed countries are able to access low-cost labor and law material in developing countries while companies from less-industrialized nations can learn high-tech expertise from industrialized counterparts. According to theory of absolute advantage and comparative advantage, free market and international trade is virtually a positive-sum game in terms of peoples living standards since individuals have free choice for cheaper products. Despite the perceived benefits generated by developed international trade, trade restrictions such as tariffs, non-tariff barriers, import licenses, import quotas, subsidies are still imposed on international trading by governments. On this essay, several reasons will be analyzed in terms of politics, economy and culture to examine authorities rationales behind barriers towards free trade.
Government intervention
In spite of the objective conditions (technology availability) and subjective efforts (agreements announced by GATT, WTO and the World Bank), government authorities are still actively imposing various policies, regulations, red taps and paperwork in cross-border trading. The repercussions resulted from such trade restriction have been heavily criticized of benefiting minority groups such as governments, giant corporations etc. at the large expense of the general public. For instance, buyers from Japan have to pay five times the world price for rice due to import restrictions claiming to protect Japanese farmers. Similarly, American consumers suffer from heavy tax burden for sugar; that is, paying six times the world price because of trade barriers. Worse yet, the US Semiconductor Trade Pact was passed to forced Japanese producers of computer memory chips to cut back production volume, which then caused a worldwide shortage in such kind of products. As a resulted, the under supply led to a severe impact on companies using these products and their consumers as well (
Nevertheless, from the perspective of government, the benefits of setting up trading barriers overweigh the harassment of ordinary customers and business undertakers. In other words, certain degree of trading restriction should be maintained to safeguard national security, protect domestic industry and preserve cultural identity.
Political motives
With respect to political considerations, the governments intervention to free trade is considered to be imperative to ensure national security and stability. Reasonably, the high mobility of capital, products and labor tend to engender greater political exposures to outsiders. Moreover, residences are likely to make comparison of political systems and then possibly become disaffected with their own regime. Take the relationship between United States and Cuba for example, during year 1961, U.S Congress passed Foreign Assistance Act which aimed to impose a total embargo upon all trade with Cuba. Even though the claimed reason nowadays is the massive violation of human rights in Cuba. Undeniably, it was very resulted from the initial concern of communism threat towards its democratic system (
Secondly, many countries strictly protect their livelihood-related industry such as agriculture to plan for contingency such as starvation and wars. Actually, the world trades talk in July 2008 of Doha Development