The Political Economy of International Trade
• Describe the policy instruments used by governments to influence international trade flows.
• Understand why governments sometimes intervene in international trade.
• Articulate the arguments against strategic trade policy.
• Describe the developments of the world trading system and the current trade issues.
• Explain the implications for managers of developments in the world trading system.
This chapter focuses on the political systems and tools of trade policy. The major objective of this chapter is to describe how political realities shape the international trading system.
With an introduction to tariffs, subsidies, and the development of the world trading system, the chapter describes the evolution of the World Trade Organization and its impact on the global business environment.
While in theory many countries adhere to the free trade ideal outlined in Chapter 5, in practice most have been reluctant to engage in unrestricted free trade.
The US continues to restrict trade in technological and militarily sensitive products as well as in textiles, sugar, and other basic products in response to domestic political pressures.
OUTLINE OF CHAPTER 6: THE POLITICAL ECONOMY OF INTERNATIONAL TRADE
Opening Case: United States Cotton Subsidies and World Trade
Instruments of Trade Policy
Import Quotas and Voluntary Export Restraints
Local Content Requirements
Country Focus: Subsidized Wheat Production in Japan
Management Focus: U.S. Magnesium Seeks Protection
The Case for Government Intervention
Political Arguments for Intervention
Economic Arguments for Intervention
Country Focus: Trade in Hormone-Treated Beef
The Revised Case for Free Trade
Retaliation and Trade War
Development of the...