Political arguments for intervention

Meaning:- Political intervention are concerned with protecting the interests of certain groups within a nation normally producers often at the expense of other groups normally consumers. They cover a wide range of issues including protecting jobs, protecting consumers from dangerous products, retaliating to unfair foreign competition and protecting human rights of individuals in exporting countries.

Protecting jobs and industries:It is felt that it is necessary for protecting jobs and industries from foreign competition. Japans quotas on imports of rice are aimed at protecting jobs in its agriculture sector.

National security:Countries sometimes argue that it is necessary to protect certain industries because They are important for national security. Defense related industries often get this kind of attention.

Retaliation:Some argue that governments should use the threat intervene in trade policy as a bargaining tool to help open foreign markets and force trading partners to play by the rules of the game.

Protecting consumers:Many governments have long had regulations in place to protect consumers from unsafe products. The indirect effect of such regulations often is to limit or ban the importation of such products. In 1998, the US government decided to permanently ban the imports of 58 types of military style assault weapons. The ban was motivated by a desire to increase public safety. Furthering foreign policy objectives:Governments sometimes use trade policy to support their foreign policy objectives. A government may grant preferential trade terms to a country it wants to build strong relations with. Trade policy has also been used several times to pressure or punish rogue states that do not abide by international law or norms.

Protecting human rights:Protecting and promoting human rights in other countries is an important element of foreign policy for many democracies. Governments sometimes use trade policy to try to improve the human rights policies of trading.

Economic arguments for intervention

The infant industry argument:It is by far the oldest economic argument for government intervention. It says many developing countries have potential comparative advantage in manufacturing but new manufacturing industries cannot compete with well established industries in developed countries. In India the retail sector is considered to be an infant industry to promote the regional players, foreign big players like walmart and Carrefour are not allowed to set up their business here.

Strategic trade policy:The strategic trade policy has components. First, it argued that by appropriate actions a government can help raise national income if it can somehow ensure that the firm to get the first mover advantage in such an industry is domestic rather than foreign enterprise. Second argument is that it might pay government to interview in an industry if it helps domestic firms overcome the barriers to entry created by foreign firms that have already reaped the first mover advantage.

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