International business reading notes.docx - International...

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International business readingP 139-160 – GOVERNMENTAL INFLUENCE ON TRADE-Why do governments try to enhance and restrict trade?
Determining whether and how to influence trade is complicated by uncertain and confliectingpolicy outcomesTheories of absolute and comparative advantage?
Governmental trade intervention can be classified as either economic or noneconomic.ECONOMIC RATIONALES FOR GOVERNMENT INTERVENTION1)Fighting unemploymentUnemployed : effective pressure group. No other group has time or incentive to protest andcontact government representatives. Workers displaced because of imports are often the leastable to find alternate work. ( if they do they earn even less than before) they often need tospend their unemployment benefits to survive in the short term and they put off retrainingbecause they hope to be recalled to their old jobsHowever, you cant use trade policies to achieve full employment. Gaining jobs by limitingimports is problematic as it will ultimately generate high costs which will be borne by someone.Retaliation : one problem with restricting imports to create jobs is that other countries, whoseproduction typically drops as a result, may retaliate with their own restrictions.EX: Vietnam responded to us catfish reduction of imports by buying less us agricultural productsHow could a restricting country gain jobs in a sector only to lose them elsewhere (even if nocountry retaliates) :1)Fewer imports of a product mean fewer import handling jobs2)

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Term
Spring
Professor
Gauvin
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