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Rationale for trade intervention
Businesspeople, politicians and economist had been arguing over international trade of
government policy, there are 2 principal issues
To protect local domestic firm, government set up import barriers or taxing the foreign
domestic
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Imports should be controlled to minimize the losses of domestic job and market share
for local domestic in specific industry
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Rationale for trade intervention: industry-level argument
National defense argument
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governmental protection of specific industries to prevent getting threatening from
other country that control critical resources
As world events can suddenly turn hostile to a country’s interest, government should
get ready with self-sufficient in terms of raw material, machinery and technology
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 This philosophy is used world-wide
 Domestic industries that are granted protection has higher comparative advantage and
have powerful economic development strategy
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 Infant industries are normally selected through politics
Maintenance of existing job
 Existing levels of employment in a high-wage company may face threat of imports
from low wage-country
 Workers can relief from foreign competition with the assistance from the government,
such as tariffs, quotas, or barrier
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Export tariff: goods are access as they leave the country
Transit tariff- when goods pass through boundaries of countries
Import tariffAd valorem tariff- charge as a fixed percentage of market value
Specific tariff- charge based on weight or other standard measure
Compound tariff- include both calculation from Specific tariff and Ad valorem tariff

Tariff barriers
Tariff have been imposed for 2 reasons
Easier of raising revenue for the national government as only people from wealthier
family will purchase imported goods, so heavy reliance on import tariffs adds progressivity to
the domestic tax system
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Act as a trade barrier by raising the price paid by the domestic consumer on foreign goods, ,
they increment the interest for locally delivered substitute products

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