Government sometimes steps in to intervene in the global trade. The government restrictions in international trade include the introduction of quotas, tariffs, and subsidies ( Satterlee, 2009 ). My perception of the international trade has been that it is a good practice which contributes highly to the country’s economy. Therefore, government restrictions to the international trade have been so odd to me. The only question I have been asking all along is, why restrict international trade? Out of the academic curiosity, I have been driven to conduct a further research on the concept of government restrictions on global trade. The main objective of this study is to examine the main reasons why government intervenes in international trade.
Explanation of Key Term
Government restrictions to international trade involve actions undertaken by the government to control quantity exported and imported ( Fang et al., 2017 ). For instance, the government may intervene in global trade to reduce imports or increase exports. Some of the distinct types of government restrictions are use of tariffs, quotas, and subsidies. A quota system outlines a restriction for specific amount of goods to be imported in the country. Tariffs on the other hand are fees charged on imported goods, while subsidies are grants the government provides for the local companies to help in increasing production.
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Major Article Summary
According to the article, the Cross Border Finance by Satterlee, global trade has a great impact on the country’s economy. A country’s economy can be measured on how well it performs in the international market; countries with stable economies tend to perform well in the global trade than those with unstable economies. The performance of a country in the global market is measured by the value of the net exports (total exports- total imports); it represents the country’s gross domestic product in an open economy. High value of net exports indicates that the country has a strong gross domestic product as compared to those with low value of net exports. A negative value of net exports indicates that the country is importing more than its exports which is a clear indication of an unstable economy.
Excess imports over exports can affect the growth of the local industries, reduce the value of the country’s currency, increase unemployment rates, increase inflation, and affect standards of living. These factors may force the government to intervene in the international trade to control the state of the economy. Whenever the country is importing more than it exports, the government will introduce quota systems to control the amount of products imported in the country. The quota system provides a limit for imports which must not be exceeded. Also, the government can impose tariffs on imported products to discourage excess imports. An increase in taxes on the imported products increases the cost of such products thus discouraging local consumers from purchasing the imports. Further, the state can provide subsidies to local producers to help local producers increase their production. This intervention increases the country’s exports by providing conditions for the local companies to produce more for exports.
Government restriction in the international trade is crucial in maintaining the state of economy. Without the restrictions, deteriorating net exports can contribute to declining economy increasing unemployment rates, economic depression, increasing inflation, and so forth.
Discussion
The Cross Border Finance by Satterlee provides a clear explanation of the key term, government restrictions in trade. It explains the concept of government restrictions in trade as well as methods of government intervention. The book highlights the conditions which forces the government to intervene in international trade. It also elaborates the concepts of quota system, tariffs, and subsidies as well as their importance. The source provides the impacts of international trade on the country’s economy, both negative and positive impacts. In the book, I found out reasons why government intervenes in the international trade. The book played a key role in the research since it had crucial information on the border trade including the importance as well as limitations of the government intervention in the international trade. The concept of government restriction in trade (key term) is well explained in the book which helped me in understating and explain the key term of the research.
The Findlay & Garnaut, The Political of Manufacturing protection provides outlines ways in which the local manufacturing industries should be protected to increase exports.
The Drivers of the Government Restrictions Journal provides the information on the factors which influence the government to intervene in the international trade. These factors highlighted in the source include deteriorating economy, unemployment, living standards, development and so forth.
Trading Restrictions and Firm Dividends provides an in-depth explanation of trade restrictions and their importance. The journal explains various types of trade restrictions and their impacts on trade as well as general economy. The journal explains why it is necessary for the existence of the trade restrictions as well as their limitations.
The Impact of Export Restrictions Journal explains the effects of restricting exports in international trade. It highlights the importance of subsidies in ensuring there are improved exports. It also elaborates condition for the growth of local industries.
The Trade and Agricultural Disease article also explains the reasons why Indian government introduced trade restrictions for agricultural products.
References
Fang, H., Song, Z., Nofsinger, J. R., & Wang, Y. (2017). Trading restrictions and firm dividends: The share lockup expiration experience in China. Journal of Banking & Finance , 85 , 83-98.
Findlay, C., & Garnaut, R. (2017). The political economy of manufacturing protection: Experiences of ASEAN and Australia . Routledge.
Kunz, N., & Reiner, G. (2016). Drivers of government restrictions on humanitarian supply chains: An exploratory study. Journal of Humanitarian Logistics and Supply Chain Management , 6 (3), 329-351.
Nanda, N., & Tyagi, B. (2018). Impact of Export Restrictions on Export of Natural Resources. India’s Resource Security: Trade, Geopolitics, and Efficiency Dimensions .
Saggi, K., & Wu, M. (2017). Trade and Agricultural Disease: Import Restrictions in the Wake of the India–Agricultural Products Dispute. World Trade Review , 16 (2), 279-302.
Satterlee, B. (2009). Cross border commerce. Roanoke, VA: Synergistics .
