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EVALUATING GOVERNMENT INTERVENTION IN TRADE
Government intervention in trade is essentially to try and improve and even maximize the
social welfare of the wider community
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Intervention helps to correct a market failure
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Common Forms of Government Intervention in International trade
Import Tariffs
By definition, an import tariff is a tax placed by governments on some specific imported
goods
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Import tariffs
increase the price of the imported product thus disrupting the balance of international trade
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In most cases, it is used to protect
peace and lives of a country´s citizens
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Governments intervene in international trade for various reasons
a)

Protecting Young Industries- Tariffs, bans and restrictions when imposed tend to
protect infant companies from stiff competition from other larger and internationally
established companies
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As start-ups
grow, the problem of unemployment is solved
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This move protects and secures their own domestic
production of these products and services
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Domestic
production ensures that a country has a stockpile of weapons in times of attack and do
not rely on imports
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Intervention protects domestic companies from massive
international competition
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Local businesses also thrive as consumers spend their incomes
locally
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Each country has a specific set environmental standard and therefore
ensures that imports into the country adhere to these standards
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e)

Consumer Protection- Most of the banned products are usually considered
dangerous
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Food products for
example, may be restricted to prevent outbreak of a disease
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For example, China and Japan, both heavy consumers of rice, believe
that rice grown abroad is not fit for consumption by their citizens
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