Question

In: Economics

is trade policy defined by ideas or interests? explain why using a specifc case. Either US,...

is trade policy defined by ideas or interests? explain why using a specifc case. Either US, China or EU

Solutions

Expert Solution

A trade policy is defined by bot ideas and interests. Lets us take an example of EU.

The EU itself is an experiment- an idea. The idea is that a monetary union of different smaller countries can act in a far more efficient manner than each country separately. That the free movement of labor, coherent and common trade policy will result in more prosperity for all involved countries. The trade policy works under that idea only. The EU tries to move in one direction, especially as far as the currency Euro is concerned and hence its trade is affected by that. Each country does trade, but it is aspired that each country would trade in products where it has most expertise and competitive advantage, and that free labor movement will help in that. There is little point in each country producing the same thing. Even EUs trade negotiations are done at EU level and not a country level.

On the other hand, interests are also important. The US may want the EU to disengage with Russia more, to affect the Russian economy, but the EU trades huge amounts of natural resources (gas, fuel) from Russia and does indeed depend a lot on that Russian supply. So despite differing from Russia on many things, including many ideas, EU still must trade with Russia because of its own interests.

Hence, we can see that trade policy depends both on ideas and interests.


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