Should Nations Use Strategic Trade Policies?

Should Nations Use Strategic Trade Policies?

To compete globally a nation must have industries that are competitive towards the global market.  These industries should be protected and nurtured with strategic trade policies (Daniels, et al, 2009).

Governments have many ways to enact strategic policies like protection of markets.  Foe example, a government can protect an infant industry from foreign imports to allow it to grow, develop and reduce costs in the domestic market.  Governments also need to act in concert with or sometimes against political action committees comprised of lobbyists with their own agenda (Daniels, et al, 2009). 

A strategic plan can help a nation’s industries compete against others.  When any nation makes strategic trade agreements, especially those protecting a particular industry, another industry or nation will suffer for it.  As one group prospers, another has to be on the loosing end of the balanced equation (Daniels, et al, 2009).

Political agendas are another reason for a strategic trade policy.  If a nation identifies a strong market it may choose to protect it with a strategic policy.  The government should target the reasons the industry is strong and target those aspects for the maximum effect of the policy (Daniels, et al, 2009).  With the passing of NAFTA, trade and jobs was not the only topic under discussion.  The environment was as well, especially concerning Mexico.  Many feared Mexico’s lackluster record of sustainable production would lead to either unfair advantage or environmental disaster, or more likely both.  NAFTA as a trade policy was set up to allow free trade between Mexico, the united States and Canada but through PAC efforts and other groups, it also mandated certain environmental milestones for Mexico to achieve for its exports (Evans and Kay, 2008).  This strategic policy was found by many to be both necessary and beneficial to the health of all three nations.

One aspect of the political agenda is establishing a strategic trade policy for environmental reasons.  As a former marine biologist I have witnessed some compelling reasons for trade policies first hand. In contemporary times, airplanes, ships, and trucks have all been used to transport goods from one part of the world to another. In addition to transporting goods between regions, airplanes, ships, and trucks have also managed to transport a whole host of invasive plant and animal species (also known as alien or non-native species) from one geographical region of the world to another.

There are many ways in which airplanes, ships, and trucks have transported invasive plant and animal species from one part of the world to another. Non- native animal species have sometimes managed to lodge themselves in the landing gear of airplanes and, as such, they have traveled as stowaways from one country to another. Similarly, a number of marine alien species have been introduced unintentionally into a region by ships dumping their ballast water. Cargo ships frequently carry ballast water in order to increase vessel stability when they are not carrying full loads. When these ships come into port, this ballast water must be released before cargo can be loaded. This means of species introductions is salient and very recently the problem of managing invasive species that have been introduced unintentionally into a particular region by means of the dumping of ballast water (Batabyal, 2006). A strategic policy banning import from certain regions, or via certain methods can protect domestic agriculture and wildlife stocks.  I feel this is a well-justified rationale for strategic trade policy.

The best defense is a good offense, and countering another strategic policy whether political or economic is important.  Opening up to foreign competition leaves the domestic industries vulnerable.  Often the first to import are well-experienced competitors that can exploit nascent industry weakness in the domestic firms.  These existing international firms already have distribution relationships and production efficiencies worked out.  Strategic policy to mitigate these advantages in the domestic market can help an infant industry grow large enough to compete globally (Daniels, et al, 2009). If the regulator has first mover advantage in terms of setting trade policy, they will often come out ahead.  Without first mover advantage, the reactionary policy may be too late to prevent a negative welfare impact on the domestic population (Foros, et al, 2009).

Ways a trade a strategic policy can be enacted is through sanctions, quotas, restrictions, enhancements and subsidies.  All of these techniques can strategically help a nations domestic industry or better prepare a specific group for global trade (Daniels, et al, 2009).

REFERENCES

Batabyal, A.G. (2007). International invasive species management. Stoch Environ Res Risk Assess, 21, 717-727.






Daniels, J. D., Radebaugh, L. H., & Sullivan, D. P. (2009). International Business (12 ed.). (S. Yagan, Ed.) Upper Saddle River, NJ: Pearson Education, Inc.










Evans, R., & Kay, T. (2008). How Environmentalists "greened" trade policy. American Sociological Review, 73(6), 970-992.






Foros, O., Kind, H., & Sorgard, L. (2009). Domestic regulation of international trade. Journal of Industrial Competetive Trade, 9, 1-16.