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.

Should Governments Forego Trade Sanctions?

Should Governments Forego Trade Sanctions?

I feel that trade sanctions in our current global world have no place.  For one, there is a domestic cost to be paidwhen cutting off a foreign market for export. This cost is borne by the industry and ultimately the citizens in theform of higher prices or less robust growth (Daniels, et al, 2009). 

Iam not convinced trade sanctions are that effective in accomplishing theirgoals.  For example, many nationspresently or recently under sanctions like Iraq, Cuba, Viet Nam, Libya canstill get many America made goods through grey market supply channels. Not allnations will comply with a sanction and others will use the decreasedcompetition to their advantage and deploy merchandise to fill the need (Danielset al, 2009).  Short of building a wallaround a nation, there are too many other ways for trade to take place thatsanctions are just not effective in the modern world. 

InIran a number of nations have halted the purchase and refining of Iraniancrude.  While this has some impact, thereare other nations, like China, willing to step up and partner with Iran andcontinue trade. In fact, this can lead to a competitive advantage for China asthey can demand more favorable terms for their continued trade with Iran(Chazan and Swartz, 2010).

Oftenthese sanctions are politically motivated for issues like regime or humansrights.  In many cases it is not toe foreigngovernment who suffers, it is the people. For half a century the US has not traded with Cuba, and it has failed tobring down the Castro government, and resulted in harsher conditions andpoverty for many Cubans (Daniels, et al, 2009). In Iraq trade sanctions did not seem to prevent cash from flowing in andout of the nation in either Gulf Conflict. In colonial times when trade was more challenging, an embargo orsanction could have an impact on the other nations.  In the modern world, the Internet,satellites, fast ships, airplanes, wire transfers, etc. all provide ways forthe sanctions to crumble.

Recentlythe President o the United States was outspoken on a trade bill that imposedenergy sanctions on fossil fuel use. Strategically it was decided this was not optimal for supporting thedomestic economy and in the long run would not result any much net savings ofCO2 emissions (Broder, 2009).

Theembargo in Cuba has not destabilized the government as predicted, but perhapsthe accumulated wealth that could result from more open trade would inspire thecitizens to change regimes.

Politicalmotivations drive many sanctions and these are often done for the wrongreason.  PACs and lobbyists all have theear of lawmakers and help influence their decisions.  If a trade sanction is to be effective insending a message it has to the proper message (Daniels, et al, 2009). 

Thereare related alternatives like tariffs that may be more focused andeffective.  I think that sanctions dosend a message to the world, but they are largely symbolic in the global modernworld.

REFERENCES

Broder, J.S. (2009, June 29). Obama opposes trade sanctions in climatebill. New York Times, A1.

Chazan, G., & Swartz, S. . (2010, March 11). Corporate news: shellhalts gasoline sales to iran. Wall Street Journal, B2.

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