Question

Evaluate the role governments play in free trade.

Answer 1

Free Trade & Government

Government does various roles in promoting and encouraging free trade. Government policies on import tariffs, quotas, and export subsidies are all factors affecting the performance of free trade. Against protectionism, government reduces import tariffs and expanding quotas which stimulate free trade. Imposing high import tariffs and reduced subsidies for exports can all affect the free trade and the level of international trade made.

Government could reduce the harmful effects to the economy through free trade. Different market structures can negatively impact economy through free trade. Government adopts policies to encourage exports of the products on which they have advantage on and import them with low advantages to produce. Government should classify the products and should encourage the domestic producers to concentrate in the products with advantages. They can erect import tariffs that could increase demand and the expansion of market. Providing export subsidies can encourage production and export which give positive effects on balance of trade. Governments should consider reducing trade barriers and imports tariffs rather than trying to reduce the level of imports. Focus must be given on expanding exports thus attaining stability and growth in free trade. Policies should be according to produce exploiting the resources and earn maximum from the capabilities.