Question

why are governments involved in trade disputes?

Answer 1

Trade dispute refers to a disagreement between the country about the products they trade with each other . The trade dispute arises when member government believe that another member government is violating an agreement or commitment that it has made. Trade dispute take a variety of forms including trade remedy cases brought under a countries on national law -with oversight via relevant WTO agreements and disputes before an international body like a WTO over whether a country has reached its trade agreement obligations.

Lets have look at some recent international trade disputes in which Governments were involved.

*Trade disputes between US and China

After US import tariff on Chinese goods worth 34 billion dollars kicked in, the Chinese government responded by impossing it's own 5 percent tariff on 545 US products also worth a total of 34 billion dollar

*Japan south Korea trade disputes

Also known as Japan south Korea Economic war is an ongoing economic conflict. South Korean Court give a verdict that Japanese companies must pay the compensation to South Korean forced to work in Japanese factories during the Japanese occupation. Japan believe that the issue was settled as per the 1955 Treaty and the court ruling violated international law therefore Japan impossed trade restrictions on South Korea.

We can see that Governments take Trade disputes very seriously as one wrong move may prove to be disastrous to their home economy.

The main reasons why Governments are involved in trade disputes can be listed as follows.

* Formation of trade policy for the national is the responsibility of the Government. Trade policies are vital to any country's prosperity.If the actions of trade partners result in the violation of the policy adopted, the Government must step in

*Eventhough Government should facilitate the free trade, Government must ensure that it's own citizens are not harmed by it.There for the Government gets involved if trading partners introduce any sort of reforms that goes against the interest of its citizens.

*Even though Government is entrusted to as adopt measures for the break down of trade barriers,it looks after the domestic industries via protectionism. Which leads to retaliation from trading partners.

*When Government of one country raises tariff on another country's imports.The country's Government responds by increasing tariffs on the imports of the first country.This situation is known as trade war.

We have a Trade dispute settlement mechanism under the WTO ,Since it's inception in 1995 , it has resolved an impressive number of trade disputes in which powerful Governments were involved.How ever,as evident from increasing trade disputes, the mechanism is in a crisis and the Members must negotiate updates to the rule book so that trade disputes between national governments are settled more quickly and effectively.