Question

Discuss the political economy of trade policies. Explain why some policies get implemented even though they may be against economic principles.

Answer 1

Ans

Political economy of trade policy is concerned with the impact of trade policy framed by the politcians on the individuals of economy . It also the analyses the impact of free trade and regulated trade on the economy through its advantages and disadvantages and select the best consequense for the economy .

Free trade policy involves the trade without government regulation  whereas the regulated trade involves regulation in trade by government through its various instruements like that of tariff, import quotas, product standards, and government subsidies.

Some policies get implemented even though they may be against economic principles due to the act of government with a intention to protect domestic industries through protectionism policies .Protectionoism policies impose restrictions on international trade for the benefit of domestic economy. The tools used by government for protectionism policies are tariff, import quotas , product standards, and government subsidies.These policies are enacted by the government which is against the economic principle of  cost and benefit analysis.