Pros and Cons of Government Intervention on International Trade

1 Pros and Cons of Government Intervention on International Trade The intervention of the government on traditional trade has become a common theme across various jurisdictions. The major reason for government intervention in international trade is to protect the consumers and producers in the economy. For instance, if a foreign producer has an excess supply, they are likely to export and dump the excess in other countries at low prices.

This will hurt the domestic producers because they may not be in a position to produce the same product and sell them at the same cheap prices. As such, the government intervenes to protect domestic producers and consumers.

The government also participates in international trade to prevent traders from being involved in different fraudulent activities. This is achieved by implementing laws tailored towards restricting the types of business in which the traders are involved. The government's involvement is also tailored towards preventing price-fixing, false advertising of products, and the creation of monopolies, which may not be desirable.

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2 Conversely, the involvement of the government in international trade has some shortcomings. By restricting the level of international trade, the consumers may not have a variety to choose from as products from foreign countries create a variety to choose from. There may also be a situation where government initiatives such as tariffs meant to protect the domestic industry spark trade wars, hence making the economy contract (Feenstra, 2015). The government involvement in the trade may hinder the mobility of factors of production, which may be beneficial to the local market, such as labor.

3 Reference Feenstra, R.C. (2015). Advanced international trade: theory and evidence. Princeton university press.