Role Of A Nation 's Government Plays On International Competitiveness And Uses Theories Essay

Main protectionist policies include tariffs, quotas, embargos and voluntary export restraints, and Adam Smith’s idea of absolute advantage has been developed further to explain international trade. In recent years, protectionism has become closely related to globalization during which the influences of trades spread almost everywhere, so people insist upon the study of social deformities generated by improper policies on international trade and the task of pointing them out with a view to remedy. There are certainly both economic and political purposes of trade

Protectionism by way of the price mechanisms such as tariffs, subsides, quotas, export licences and import duties (Rugman, 2009) are just some of the measures which can seriously impact on a foreign company. For example the American steel industry was afforded protection under the Bush administration when large tariffs were imposed on foreign steel imports in order to safeguard the jobs of the national steel workers (Mankiw and Taylor, 2008).

In modern economic policy of nations and states, the tariffs a tool to tax goods and services being imported. The principal desired outcome for this tool is to create security for the domestic industry from the imported product, which may be cheaper for consumers to purchase. (McEachern, 2015)

As a result, they are forced to move their business into other countries or make their costs more competitive in order to compete with domestic industries. Moreover, once a country enforces protectionism on their products, other countries tend to retaliate by enforcing even stronger protectionist policies. This is called a “trade war” and further prevents international businesses from exporting their products to other countries without paying high tariffs. An example of this is how the United States enforced extremely heavy protectionist policies on their products and services against Canada’s airplanes and other products. This greatly hurt Canada’s industries, and they retaliated by increasing the tariffs on their products; thus creating a trade

When governments amongst nations conduct in international business, it exposes them to increased risks and costs through unfair trade and bribery in order to obtain a competitive advantage or power. Mercantilism explains why the government intervention of international business increases the chances of these risks. Mercantilism is the theory that explains, the government will maintain their economy and trade to promote their own domestic industry at the cost of the other country leading to unfair trade (Pettinger,2016). As all governments will not play by the same rules, there is an increase in risks such as unfair tariff policies or bribery in order to gain a competitive advantage. In fact, many governments across nations will use these unfair actions to gain an increase in power. Hill (2015) states that nations like China are striving for a more neo mercantilist policy (a more modern theory of mercantilism where economic power is the equivalent to a trade surplus) to gain a trade surplus. During most of the 2000s, their exports have been increasing whereas their imports have not grown because they have been limited by an import substitution policy. While China is able to benefit from the trade surplus, it is at the cost of another nation where the money that will be paid for those imports will decrease. Therefore, government intervention in international business increases risk like unfair trading to gain a competitive advantage. The government also increases the cost of

One of the greatest international economic debates of all time has been the issue of free trade versus protectionism. Proponents of free trade believe in opening the global market, with as few restrictions on trade as possible. Proponents of protectionism believe in concentrating on the welfare of the domestic economy by limiting the open-market policy of the United States. However, what effects does this policy have for the international market and the other respective countries in this market? The question is not as complex as it may seem. Both sides have strong opinions representing their respective viewpoints, and even the population of the United States is divided when it comes to taking a stand in

The country can maximize their wealth by putting the resources in the most competitive industries. Government created comparative advantage rather than free trade because now easier moves the production processes and the machines into countries that can produce more goods (Yeager & Tuereck, 1984). However, many countries now move to new trade theory suggests the ability firms to limit the number of competitors associated with economic scale (reduction of costs with a large scale of output) (Krugman, 1992). The comparative advantage occurs when two-way trade in identical products, it will useful where economic scale is important, but it will create problem with this model. As a result, government must intervene in international trade for protection to domestic firms (Krugman, 1990)

“Trade freedom reflects an economy’s openness to the import of goods and services from around the world and the citizen’s ability to interact freely as buyer or seller in the international marketplace” (Miller and Kim, 2011). Tariffs, export taxes, trade quotas, trade bans, and other trade restrictions all hinder the free flow of foreign and domestic commerce. Tariffs and export taxes increase prices to both

Free trade has long be seen by economists as being essential in promoting effective use of natural resources, employment, reduction of poverty and diversity of products for consumers. But the concept of free trade has had many barriers to over come. Including government practices by developed countries, under public and corporate pressures, to protect domestic firms from cheap foreign products. But as history has shown us time and time again is that protectionist measures imposed by governments has almost always had negative effects on the local and world economies. These protectionist measures also hurt developing countries trying to inter into the international trade markets.

Every business’s goal is to maximise profit, generate more revenue and increase customer satisfaction. Although to achieve these goals could be changing, barriers from the economic conditions, government and competition has increased the difficulties. Governments and businesses are interdependent, the interdependence will grow further by globalisation of the economy when it comes to international business. Mamman (2004) states: “One of the manifestations of globalisation is the blurring of political and economic boundaries and the diminishing traditional role of national governments.” The role of government has always been an important factor in business, they create rules and frameworks that let businesses compete against each other. Business is affected by the government policy, the rules and frameworks can force them to change the way how they operate. The policies of the government can have implications. For example the requirements of licensing, other permissions, regulations, taxation and formalities. All these restrictions have a direct impact on doing business.

Ever since the first involvement of government in international trade, many people have posed their opinion about what the role of government should be in it. Different factors are involved when it comes to deciding what this should be. It impacts a lot of people, so in order to do that, trade policy must be properly defined, identify what the roles of government currently are, and their involvement in it, and then analyse what should be their role. Trade policy is how a country carries out trade with other countries (Commercial Policy, n.d). Even though a lot of people support government intervention in international trade, countries would benefit a lot more if the government removes protectionism and promotes free trade instead.

The level of internationalisation around the globe has grown throughout the years, with advanced technologies the ease and ability to work with foreign countries has also grown. However, firms do not simply interact with each other with no outside party involvement; the government can be seen to play a large role in conducting international business. Governments continuously have the responsibility to act in the manner that they believe is best for their nation; this includes decisions regarding protectionism, which may serve to aid domestic industries but simultaneously hinder international business. It can be seen that governments do not always act in their nation’s best interest and are corrupt which can serve to increase the risks and costs of entering an international business environment. While these are examples in which the government makes international business difficult it can also be seen that the presence of a government is instrumental in creating international business effectiveness, whether this be through their legal system or from trade agreements. This makes the role the government plays paradoxical; as their involvement generally increases the risks and costs of firms seeking to internationalise, whilst simultaneously playing a significant role in creating international business effectiveness.

Any country should use porter diamond theory of national advantage. It's designed to help understand the competitive advantage nations. It suggests that the national home base of any organizations are playing a supportive role in shaping the size or scoop to which it is likely to achieve advantage on a global scale. This home base provides basic factors, which support organizations from building advantages in international competition. Porter classifies four determinants: Factor Condition, Diamond Condition, Relatives & supporting and Structure, strategy & Rivalry. Egypt government acts to catalysts to improve Egypt position in a globally competitive economic environment. They found that they can create new factors such as skilled labor and high technology (Porter M., 1990). Porter's diamond model suggests threat there are inherent reasons why some nations are more competitive than others on an international market. Another factor that influence in competitive advantages such as the policies that put by government. One of the most influencer policies is (FDI) Foreign direct investment

The concept of national competitiveness has become a key issue to managers of firms and understanding it has important ramification for policy makers as well. While most agree on the idea of competitive firms, the notion of competitive nations is vague at best. Even with all the debate, discussion, and research there is still no pervasive theory. In fact, there is not even an accepted definition. Classical economic theorists dismiss the concept of competitiveness all together and instead look to comparative advantage and the drivers of trade surplus to explain national prosperity as a positive sum game. Harvard’s Michael Porter approaches the subject from a different view, asserting that defining competitiveness as

To understand the comparison of protectionist rationales used in high-income countries with those used in low-income countries’ economies