Helps ensure the safety security and welfare of citizens Most countries have

Helps ensure the safety security and welfare of

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Helps ensure the safety, security and welfare of citizens Most countries have basic regulations to protect the national food supply Can serve the interests of the nation’s firms and industries Defensive Rationale for Government Intervention: Governments impose defensive barriers to safeguard industries, workers and special interest groups and to promote national security Protection of the National Economy weak/young economies sometimes need protection from foreign competitors India imposed barriers to shield its huge agricultural sector (which employs millions) Protection of an infant industry Young industries may need protection to give it a chance to grow and succeed Japan protected its car industry to give it a chance to grow (now a huge part of Japans economy National Security US prohibits exports of plutonium and similar products to North Korea Export Controls - a government measure intended to manage or prevent the export of certain products or trade with certain countries National Culture and Identity Canada restricts foreign investment in its movie and TV series Offensive Rationale for Government Intervention: Governments impose offensive barriers to pursue strategic or public policy objectivves such as increasing employment or generating tax revenues National Strategic Priorities
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Proactive variation of the infant industry rationale and related to national industrial policy Protection helps ensure the development of industries that bolster the nation’s economy Countries create better jobs and higher tax revenues when they support high value adding industries (such as IT automotive, pharmaceuticals or financial services) Increased Employment Protection helps preserve domestic jobs (at least short term) However, protected industries become less competitive over time (especially in global markets - leading to job loss (long term) Subsidies Subsidies - government grants (monetary or other resources) to firm(s) intended to ensure their survival or success by facilitating production at reduced prices or by encouraging exports Grants include cash, tax breaks, infrastructure construction or gov’t contracts at inflated prices Governments sometimes retaliate against subsidies by imposing countervailing duties Countervailing duty- tariff imposed on products imported into a country to offset subsidies given to producers or exporters in the exporting country Subsidies may allow a manufacturer to practice dumping (pricing exported products at less than their normal value, generally less than their priced in the domestic or third country markets or at less than production cost) WTO prohibits subsidies when it can be proven that they hinder free trade. Countervailing duties - tariffs on products imported into a country to offset subsidies given to producers or exporters in the exporting country The duty serves to cancel out the effect of the subsidy, eliminating the price advantage the exporters would otherwise obtain Dumping - to charge an unusually low price for exported products, typically lower than
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