RegulatingImport Competition and Unfair Trade
Tocreate a health macroeconomic environment for trade in a country,many governments adopts appropriate methods of regulating importcompetition and unfair trade. In the same way, governments adoptmethods that affect the regulation of exports. Some of these methodsinclude provision of subsidies to local industries, importrestrictions and devaluation of local currency. To understand themotives of the government, this discussion will explore the methodsof subsidies and trade restrictions as methods of regulating importcompetition and unfair trade.
Accordingto Edwards and DeHaven (1), governments such as the United Statesemploy restriction policies to imports as a way of regulating unfaircompetitions in the trade. This allows the government to have a gripon the expenditure over products that can be produced in the country.In addition, Schaffer(304), reports that the use ofsubsides helps governments to reduce competition for imports bypromoting local industries. Through subsides, the local manufacturersincrease their production and sell products at low price. Schaffer(304) asserts that this policymakes local productions cheaper than imports, which makes localconsumers to opt for the local products. As a result, imports arereduced and competition reduces.
Theneed for regulation is caused by the problem of the increased declineof local industries due to consistent competition for imports.Another problem is the rise of dumping as a problem where the localmarkets of a country are filled with substandard and cheap goods.Therefore, with the approval of the International TradeAdministration, governments impose trade restrictions againstimports. According to Edwards and DeHaven (1), the United Statesmarket is damaged by the importation of low-priced products. Thiscauses the local consumers to compete for the cheap imports, andadopting unfair trade practices to gain more for the imports. As aresult the local industry is damaged due to the loss of market to theimports that support foreign manufacturers.
Thenature of the regulation of import competition using traderestrictions can be quantitative or value-based restriction policies.First, the government can use quantitative measures such as quotas torestrict the amount that an importer can import. At the same time,the government can limit the number of importers that are licensed toimport certain products that are under regulation. In addition, thegovernment can use value-based restriction policies by limitingimports to a certain monetary value. Through such a restriction, thecompetition for imports as well as unfair trade practices byimporters is regulated. On the other hand, the government can usetotal ban to restrict the importation of certain goods that aredeemed to cause the problem of import competition or unfair trade.
Theserules are put in place through regulatory agencies. The importrestriction policies through the use of quotas, customs duty andbanning are done by specialized regulatory agencies. For instance,the United States government implements its restrictive policiesthrough International Trade Commission (Edwards and DeHaven, 1). Atthe same time, international regulatory agencies such as the ITAregulate the restriction methods adopted by individual governments.On the other hand, the use of subsidies to support the localindustries is done, though executive orders in some countries andthrough regulatory agencies in others. Most common methods adopted isthrough the use of fiscal policies during annual policy readings bythe government and budgetary practices.
Theeffect of the adoption of the regulation policy is a reducedimportation of the regulated product. As a result, the total level ofimports is reduced in terms of value and volume (Schaffer301). The consequence of thelocal market is increased consumption of the local product. Thecombination of the policy with subsides translates to increasedproduction of local products. As the local products become cheaperdue to subside, the competition for imports reduces since localconsumers prefer the local products. In addition, the importrestriction policies are effective in eliminating the problem ofdumping and unfair trade policies.
Theefforts by the government to regulate imports are good for the localeconomy. This is because they facilitate the growth of infantindustries as well as established local industries. In addition, theyprevent businesses to adopt unfair trade practices due to competition(Schaffer302). Moreover, the promotion oflocal industries has a multiplier effect in terms of macroeconomicbenefits. The growth of local manufacturing creates employment in thecountry by preventing the exportation of employment through importinggoods from foreign manufacturers. At the same time, it promotesexploitation of local natural resources.
Insuch situations as the ones presented by high import competition andunfair trade practices, I would have employed the same policies. Thisis because they are effective in regulating imports and growing thelocal industries. With a proper combination of import restrictions,and application of subsidies to local industries, the results of thepolicies is beneficial for the local economy. Moreover, theapplication of the import regulatory policies is for furthermacroeconomic development in the country of increasing employment andresource utility. Therefore, the policies are important for theeconomy as well as the international trade.
Edwards,Chris, and Tad, Dehaven. InternationalTrade Administration.Web, Accessed, November 15, 2014<http://www.downsizinggovernment.org/commerce/ita#2>
Schaffer,Richard, Agusti, Filiberto and Dhooge, Lucien. InternationalBusiness Law and Its Environment.Stamford: Cengage Learning, 2014, Print