Primer II: Government Regulation Of Trade
Primer II: Government Regulation Of Trade

Efforts to Manipulate Trade Flows

As we have seen, there are many good arguments for allowing free trade among states. Trade helps economies grow and facilitates the most efficient production of goods and services across the globe. One might think that governments would want to encourage this efficiency and would agree to let trade occur unregulated.

In practice, however, governments often try to manipulate trade in a variety of ways. They do this to achieve a wide array of economic, political, and diplomatic objectives. Government regulation of trade—as well as efforts over the past five decades to minimize that regulation—have had a significant impact on global trade flows, economic growth, and prosperity. For this reason, it is useful to consider the main ways that governments have tended to regulate trade and, more recently, to deregulate it.

Governments have traditionally tried to manage trade flows in two basic ways:

  1. By restricting imports; and
  2. By encouraging exports.

 

Next: Import Restrictions