<< Chapter < Page Chapter >> Page >

Trade policy at the national level

Yet another dimension of trade policy, along with international and regional trade agreements, happens at the national level. The United States, for example, imposes import quotas on sugar, because of a fear that such imports would drive down the price of sugar and thus injure domestic sugar producers. One of the jobs of the United States Department of Commerce is to determine if imports from other countries are being dumped. The United States International Trade Commission—a government agency—determines whether domestic industries have been substantially injured by the dumping, and if so, the president can impose tariffs that are intended to offset the unfairly low price.

In the arena of trade policy, the battle often seems to be between national laws that increase protectionism and international agreements that try to reduce protectionism, like the WTO. Why would a country pass laws or negotiate agreements to shut out certain foreign products, like sugar or textiles, while simultaneously negotiating to reduce trade barriers in general? One plausible answer is that international trade agreements offer a method for countries to restrain their own special interests. A member of Congress can say to an industry lobbying for tariffs or quotas on imports: “Sure would like to help you, but that pesky WTO agreement just won’t let me.”

If consumers are the biggest losers from trade, why do they not fight back? The quick answer is because it is easier to organize a small group of people around a narrow interest versus a large group that has diffuse interests. This is a question about trade policy theory. Visit this website and read the article by Jonathan Rauch.

In newspaper headlines, trade policy appears mostly as disputes and acrimony. Countries are almost constantly threatening to challenge the “unfair” trading practices of other nations. Cases are brought to the dispute settlement procedures of the WTO, the European Union, NAFTA, and other regional trading agreements. Politicians in national legislatures, goaded on by lobbyists, often threaten to pass bills that will “establish a fair playing field” or “prevent unfair trade”—although most such bills seek to accomplish these high-sounding goals by placing more restrictions on trade. Protesters in the streets may object to specific trade rules or to the entire practice of international trade.

Through all the controversy, the general trend in the last 60 years is clearly toward lower barriers to trade. The average level of tariffs on imported products charged by industrialized countries was 40% in 1946. By 1990, after decades of GATT negotiations, it was down to less than 5%. Indeed, one of the reasons that GATT negotiations shifted from focusing on tariff reduction in the early rounds to a broader agenda was that tariffs had been reduced so dramatically there was not much more to do in that area. U.S. tariffs have followed this general pattern: After rising sharply during the Great Depression, tariffs dropped off to less than 2% by the end of the century. Although measures of import quotas and nontariff barriers are less exact than those for tariffs, they generally appear to be at lower levels, too.

Thus, the last half-century has seen both a dramatic reduction in government-created barriers to trade, such as tariffs, import quotas, and nontariff barriers, and also a number of technological developments that have made international trade easier, like advances in transportation, communication, and information management. The result has been the powerful surge of international trade.

Key concepts and summary

Trade policy is determined at many different levels: administrative agencies within government, laws passed by the legislature, regional negotiations between a small group of nations (sometimes just two), and global negotiations through the World Trade Organization. During the second half of the twentieth century, trade barriers have, in general, declined quite substantially in the United States economy and in the global economy. One reason why countries sign international trade agreements to commit themselves to free trade is to give themselves protection against their own special interests. When an industry lobbies for protection from foreign producers, politicians can point out that, because of the trade treaty, their hands are tied.


United States Department of Labor. Bureau of Labor Statistics. 2015. “Employment Situation Summary.” Accessed April 1, 2015. http://www.bls.gov/news.release/empsit.nr0.htm.

United States Department of Commerce. “About the Department of Commerce.” Accessed January 6, 2014. http://www.commerce.gov/about-department-commerce.

United States International Trade Commission. “About the USITC.” Accessed January 6, 2014. http://www.usitc.gov/press_room/about_usitc.htm.

Questions & Answers

what is law of demand
Hugo Reply
what is the law of demand
What is the law of demand
just considering the relationship between price and quantity, holding other factors constant.
when the price of a commodity increases, it's demand will decrease. and when the price of a commodity decreases, it's demand will increase, other things remaining the same or constant. That is called Law of Demand.
other things remained constant there is inverse relationship between price and quantity demand i .e when price of a commodity increased the demand of quantity will decrease and vice- versa.
right @KhatoonNafisa
sir define me prison of delima
Ibrahim Reply
explain the determinants of derive demand?
what financial market is all about
Emmanuel Reply
What happens to the ppf curve due to following events a) A relaxation of policies allowing more foreign direct investment into the country b) Increasing the minimum wage level c) A decrease in expenditure on research and development d) An increase in the retirement age
luvi Reply
is truly
Discuss various from the imperfect competition
ZuBaIr Reply
hi how do get your workers to be more competitive
hey where from you all
tell me the defference between budget constraint and limited resources
Emmanuel Reply
what is budget constraint?
Emmanuel Reply
Budget constraint refers to all the combinations of goods and services which an individual can buy on a given price and with his given income.
what are the job markets for an economist?
Emmanuel Reply
An economist can serve as a consultant in a bank, whether commercial or governmental. He can also works as a Professor in the University, analyst and forecaster and other sectors of the society
can l know tbe maln mathematical topic required for studing economics?
Emmanuel Reply
You'll need knowledge in calculus
bbs 1 St year economics note dinu
Laxman Reply
What is taste and preferences
Jacjac Reply
sir please tell me what is statitics
Ankita Reply
what is demand?
BtsARMY Reply
a dire need of something
by consumers
such as the quality of life
Demand simply means the amount of goods and services a consumer is willing to purchase at a given price level at a given period of time in the markets.
quantity of goods or services a buyer willing to buy at certain period of time give other things are equal. Or it is simply the willing + the ability.
What is income effect? please tell friends 🙏
Income effect simply defines how the change in price can change in the quantity that consumer will demand of that good . It means if price increases the demand to buy that good decreases because price of a good directly effects on real income.
change in price and the effect on quantity demanded.
how do you derive a marginal value product and average value product equations from cobb Douglas production function?
Tebogo Reply

Get the best Microeconomics course in your pocket!

Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Microeconomics' conversation and receive update notifications?