* Governments intervene in trade and investment to grasp political, social, or economic objectives.
* Governments impose trade and investment barriers that gather interest groups, such as interior(prenominal) firms, industries, and labour unions.
* Government intervention alters the competitive landscape, by hindering or helping the ability of firms to compete internationally.
* Government intervention is an important dimension of country risk.
* Protectionism â€" national economic policies that restrict free trade. unremarkably intended to raise revenue or protect domestic industries from foreign competition.
* Customs â€" the checkpoint at national ports of entry where officials visit imported
goods and levy tariffs.
Government Intervention: Key Instruments
* duty a tax on imports (e.g., citrus, textiles)
* Nontariff trade barrier political science policy, regulation, or procedure that impedes trade
* Quota quantitative restriction on imports of a specific product (e.g., imports of Japanese cars)
* Investment barriers rules or laws that hinder foreign direct investment (e.g.
, Mexicos restrictions in its oil industry)
Consequences of Protectionism
* lessen supply of goods to buyers
* Price inflation
* Reduced variety, fewer choices available to buyers
* Reduced industrial competitiveness
* different adverse unintended consequences (e.g., while the home country dithers, another(prenominal) countries loafer race ahead)
General Rationale for Government Intervention
* Tariffs can generate substantial government revenue. This is a key precept for protectionism in undeveloped economies.
* Helps ensure the safety, security, and welfare of citizens. E.g., most countries dedicate basic regulations to protect the national food supply.
* Helps the government be broad economic, political, and social objectives for the nation.
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