Module 2 MARN03B

SELF_ASESSMENT

1. List and briefly describe the three main reasons why governments often want to block or
restrict trade. Describe three actions a government can take to encourage international trade.

It is stated that the governments’ major reasons on restricting or blocking trades are
quota systems, tariffs and subsidies. Whereas, quota systems refer to imposing restrictions on
specific number of goods to be imported to a country. It allows the government to control the
quantity of imports in protecting domestic industries. Tariffs are the fees paid on imported
goods. It increases the price that consumers pay for their goods and reduces the quantity of the
good demanded. While, subsidies are described as grants given to domestic industries that help
them to develop and compete with foreign producers.

Some of the actions that should be implemented in promoting international trade are
presenting the benefits of international trade in terms of strengthening public and economic
relations, expanding their markets and access to services provided by various countries, and
fueling the scale of innovation, union and economies.

2. Why might a foreign government want to discourage or block global marketers, and what
actions might they take to do this?

Since doing businesses and managing the economy is a gamble, threats and conflicts
are expected. The political structure of a certain country may also jeopardize the success of the
foreign producer in international trade. It will indeed lead to difficulties because cultures and
interests of the other country should also be considered. These are some of the reasons why
some foreign government discourages or blocks global marketers.

On the other hand, foreign government could utilize international law concerning the
rules and principles that the country may take measures to successfully prevent global
marketers in their state. They may also consider other related factors such as market
participants, taxation and .impacts of the trade in both parties. Lastly, trade barriers could be
induced in restricting international trade.

3, Describe the main forms of regional economic cooperation. What factors tend to promote
such arrangements?
 There are four main types of regional economic integration namely free trade area,
customs union, common market and economic union. Free trade area is the most basic form
whereas its members remove all barriers to trade between themselves but they are free to
independently determine trade policies with non-member nations. In case of custom union, its
barriers to trade are removed between member countries and the members agree to treat trade
with non-member countries in similar manner. Common market on the other hand is the type
that allows for the creation of economically integrated markets between member countries.
Trade barriers are removed and workers no longer need a visa or work permit to work in
another member country of a common market. The political union refers to the type when
countries enter into an economic agreement to remove barriers to trade and adopt common
economic policies.

Aside from that, these arrangements are encourage because it involves trade creation,
employment opportunities and consensus and cooperation. These will grant more opportunities
for countries to trade with one another due to a reduction or removal of tariffs, cooperation
results in cheaper prices for consumers in block countries. Additionally, it can expand job
opportunities and facilitates regional understanding for closer political cooperation.

4, Why and how would governments restrict trade. Use examples to illustrate.

If domestic industries cannot compete against foreign industries, the government will
restrict trade to help the domestic industries develop. On some cases, governments impose
barriers to protect domestic industry or to punish a trading partner. Governments may also
restrict trade to foster business at home rather than encouraging business to move out of the
country.

Some of the processes that they conduct to restrict trades are tariffs, or taxes on
products imported into the United States, protect domestic industries by raising the price of
foreign goods. Quotas restrict the amount or value of a foreign product that may be
imported; quantity quotas limit the amount of a good that may be imported, and value
quotas limit the monetary value of a good that may be imported. Subsidies, payments made by
the government to domestic firms, both encourage exports and make domestic products
cheaper to foreign buyers.