What are the arguments against strategic trade policy? What would happen then if we let government intervene to support domestic firms in order to help them gain first-mover advantages?
- Retaliation and trade war
Establishing domestic firms in a dominant position in a global industry with the help from the government will boost national income at the expense of other countries leading to retaliation(=revenge) and finally a trade war.
- Domestic policies
Some governments might not act upon the common good of the country, but rather support specific groups with great political influence.
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Government Policy and International Trade
- What are the implications for managers of developments in the world trading system? Why should a manager of an international firm care about the political economy of free trade or about the relative merits of arguments for free trade and protectionism?
- What is the development of the world trading system like and the current trade issue?
- Why do governments sometimes intervene in international trade?
- Which policy instruments are used by governments to influence international trade flows?