Whose interests should be paramount concern of government trade policy—the interests ofproducers (business and their employees) or those of consumers? I think policy needs to look after the interests of business and consumers. The government has the best interests of producers in mind; they have a responsibility to have a policy that will ensure that our producers will have a competitive advantage in the world market. The new trade theories outlined by C.W. Hill are designed to help business capture first mover advantages. C.W. Hill suggests government intervention can be self-defeating, as it sometimes protects the inefficient, or triggers trade wars. On the other hand, if the government doesn’t set policy to protect the interests of business, then global firms may take an unfair advantage.Porter’s theory, argued that a nation’s firms gain competitive advantage if their domestic consumers are sophisticated and demanding. Such consumers pressure local firms to meet high standards of product quality and to produce innovative products. So a free trade policy will benefit the long-term interests of consumers and business. “Firms that produce close substitutes; but the firms' competitive environment has a common stricture, consisting of five competitive forces. These forces, which are viewed as the determinants of the industry's overall competitiveness and profitability” (Ormanidhi O, Stringa O., July 2008)Given the arguments relating to the new trade theory and strategic trade policy, what kind of trade policy should business be pressuring government to adopt?The objective of Chapter Five is to understand how the reality of international trade deviates from the theoretical ideal of unrestricted free trade. New trade theory tells us that the increasing returns to specializations and first mover advantages matter. This theory is principally based on the argument for first mover advantages, where the government uses subsidies to increase the chances of becoming first movers in emerging industries. The business community is encouraging governments to promote free trade and strengthen the WTO.
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