The chapter focuses on international trade and how most governments usually view free trade as ideal but may interfere with the trading for political and economic reasons. The instruments used by governments to regulate trade include; tariffs, subsidies on goods, import quotas on goods and services, voluntarily restraining some exports, duties against dumping, administrative policies, and local content requirements. The chapter gives examples of instances where governments use these policies, such as the case of subsidized wheat production in Japan (Hill, 2012).
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The chapter describes some of the explanations that governments give for interfering with trade. Governments argue that they want to protect consumers by retaliating to countries that have imposed tariffs on them or limited their exports, protecting human rights especially in countries whose leaders disrespect human rights, such countries may be denied the opportunity to trade and finally to enhance diplomatic relations between countries.
The economic arguments are that the government interferes with trade to protect new industries, especially in developing countries. These industries are usually unable to compete with the already established companies and have to be supported until they can break even. Another economic argument is that they are applying strategic trade policy, which is thought to have seen the Boeing Aircraft Company develop into a successful company.
The chapter then discusses how and why it was necessary to have a world trading system. It details the development of international trade from the General Agreement on Tariffs and Trade up to the formation of the World Trade Organization in the year 1995. The chapter explains the achievements made by the World Trade Organization in its attempt to reduce trade barriers. It further explores the future of the WTO and lists issues that have not been resolved and that may need to be resolved, they include; anti-dumping actions and law, protection of Agricultural products, and protection of Intellectual property (Hill, 2012).
The chapter also summarizes why managers in international organizations must understand the politics behind the trading and how tariffs and import quotas may limit their firm’s ability to sell their produce in the market. Furthermore, it helps them understand how antidumping regulations may prevent a firm from using aggressive prices to compete with other producers.
The book has aided me in understanding the importance of politics in international trade and how it is affected by various factors. Countries may impose trade barriers to protect their producers and consumers. They may also impose barriers to protect human rights, especially by issuing trade sanctions to countries whose leaders have committed crimes against humanity and are unwilling to cooperate with the International Criminal Court.
Furthermore, the chapter gave me an in-depth understanding of the different instruments used by countries to create barriers. This knowledge will aid in understanding the steps or measures taken by different countries and the reasons why the measures have to be taken about international trading (Hill, 2012).
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The importance of the World Trade Organization cannot be overlooked. The organization fills a gap between countries, and it is a judge when two countries have problems concerning trade. It has often been able to mediate in resolving disputes between the USA and China regarding trade. Thus, all countries must cooperate with the WTO.
As a student of business and economics, I look forward to working as an international manager. This requires an understanding of the politics in international trade and the implications of trade barriers on my organization. My understanding of the problem will ensure that I can come up with effective solutions to the problems or ways in which one can ensure his or her organization avoids such trade barriers.
Hill, C. (2012). International Business. New York, NY: McGraw Hill.