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BUSI 2701

Lecture 5 What is the Political Reality of Int Trade - Free trade occurs when govt do not attempt to restrict corp/ consumers can legally buy from another country or what they can legally sell to another country - Many nations nominally into free trade, govt still intervenes in int trade for pol reasons Why do Govts Intervene in Markets? 1) Pol arguments – concerned with protecting the interests of certain groups within nation (normally producers) often at the expense of other groups (normally consumers) 2) Econ arguments – concerned about boosting the overall wealth of a nation – benefits both prod and consumers What Are Political Arguments for Govt Intervention? - Protecting jobs: the mstn common pol reason for trade restrictions o Results from political pressure by unions or industries that are “threatened” by more efficient foreign producers, and have more political clout than consumers - Japans farmers oppose pacific free trade talks o Nov 12 2010 NY times o Hiroko tabuchi, makiko inoue contributed reporting form Tokyo o The idea of a vast free trade zone of pacific countries pits Japan’s farmers, who benefit from tariffs, against the country’s exporters - Protecting industries, deemed important for national security - industries like aerospace or electronics are often protected because they are deemed important for national security o Canada has provisions that allow it to deem some govt contracts not open to foreign companies bids  Canadian defence firms often lobby the govt to apply these provisions for various contracts although they are generally not successful  Municipal govts restrict procurement to local entities (currently a CETA negotiation issue) o Prevent state owned firms influence (TPP issue: Malaysia) - Retailing against unfair foreign competition – when govt take, or threaten to take specific actions, when other countries fail to remove trade barriers o WTO rulings in favour of Canada re country of origin labelling, but US not complying yet, therefore o Ottawa is warning it may impose tariffs on everything from orange juice to bread if the US doesn’t change a meat labelling policy targeted at Canadian beef (CBC News, June 2013) - Protecting consumer form dangerous products – limit unsafe products (lead toys, mad cow) - Furthering the goals of foreign policy, preferential trade terms can be granted to countries that a govt wants to build a strong relationship with, provision of most favoured nation status to China in the 1990’s by the US (prior to Chinas entry into the WTO) or o Trade policy can also be used to punish rogue states  The helms burton act (re Cuba) and the D’Amato Act (re Iran and Libiya sanctions) of 1996  Current trade embargo on Iran/North Korea  Removal of barriers for Myanmar o Ex  Oct 4,2011 NY Times China Criticizes US Senates Currency Manipulation Bill - Protecting or promoting the human rights of individuals in exporting countries o USA granted China MFN (most favoured nation) - Influencing environmental stds in exporting countreis – through regulatory approval processes: Keystone pipeline for ex Obamas stmts
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