Briefly discuss the four non economic rationales for governmental intervention in the free movement of trade: maintaining essential industries, preventing shipments to unfriendly countries, maintaining or extending spheres of influence, and preserving national identity.
Answer:
a. Maintenance of essential industries (especially defense): A major consideration behind governmental action on trade is the protection of essential domestic industries during peacetime so that a country is not dependent on foreign sources of supply during war. This is called the essential-industry argument. This argument for protection has much appeal in rallying support for import barriers. However, in times of real crisis or military emergency, almost any product could be essential. Because of the high cost of protecting an inefficient industry or a higher-cost domestic substitute, the essential-industry argument should not be accepted without a careful evaluation of costs, real needs, and alternatives. Once an industry becomes protected, that protection is difficult to terminate because protected companies and their employees support politicians who will support their protection from imports.
b. Prevention of shipments to unfriendly countries: Groups concerned about security often use defense arguments to prevent exports, even to friendly countries, of strategic goods that might fall into the hands of potential enemies or that might be in short supply domestically. Export constraints may be valid if the exporting country assumes there will be no retaliation that prevents it from securing even more essential goods from the potential importing country. Trade controls on nondefense goods also may be used as a weapon of foreign policy to try to prevent another country from easily meeting its economic and political objectives.
c. Maintenance or extension of spheres of influence: Governments frequently give aid and credits to, and encourage imports from, countries that join a political alliance or vote a certain way within international bodies. A country's trade restrictions may also coerce governments to follow certain political actions or punish companies whose governments do not follow the actions.
d. Conservation of activities that help preserve a national identity: Countries are held together partially through a common sense of identity that sets their citizens apart from other nationalities. To protect this "separateness," countries limit foreign products and services in certain sectors, particularly the media.