Why do governments sometimes intervene in international trade?
The reasons for governments to intervene in international trade are mostly for political and economic reasons.
- Political reasons.
- Protecting jobs and industries
- Protecting national security
- Protecting consumers
- If a product seems to have the ability of endangering its consumers in any way.
- Furthering foreign policy objectives
- Building good relationships with countries favored by the government.
- Protecting human rights
- Economic reasons.
- The Infant Industry Argument
- Subsidies from the government to give initial support to domestic firms that are trying to establish themselves in an already competitive market. Once they have gained market shares and is functioning well, the subsidies will be removed.
- Strategic Trade Policy
- Government intervention can be appropriate in order to either help a domestic firm gain first-mover advantage in a global market, or to help domestic firms overcome barriers of late-mover disadvantages.