Government policies have direct impacts on business activities.Nations worldwide use ‘protectionism’ policies to deal witheconomic challenges associated with international trade.Consequently, political variability and how they affect tariffs andsubsidies are important considerations for business organizations. Agood example of protectionist policies involves states adoptingstrict local trade laws to discourage imports while subsidizing someindustries’ operations. This is evident in the European Union tradebloc. Additionally, they have banned imports of products such as beefand chicken from the United States. Other nations like India andRussia have introduced tariffs that protect their steel andautomobile industries respectively. In contrast, the Americangovernment has refrained from `protectionism` economic policies(David & David, nd).
These policies have implications on trends in international trade andbusiness strategies. An open market has the tendencies of floodingthe local markets with imported goods. Consequently, nations can seekto protect their growing industries from foreign competitions. Thisenables the economies to gain efficiency and competitive advantage tocompete globally. Additionally, the policies can be a temporarysolution to high unemployment rates. By protecting the localcompanies through tariffs, subsidies, and quotas, more jobs areavailable in the domestic labor markets (Bozyk, 2012).
However, protectionism results in a weaker economy. Economic theoriessuggest that industries are strengthened by the efficiency thatresults from competition. Government interventions that protect localmanufacturers result in inefficiency and low quality of goods.Additionally, ‘protectionism’ is a short term solution, and,therefore, unsustainable. In the modern business environment, wheretechnology has a huge influence on the markets and corporatestrategies, it is easy for organizations to counter governmentrestrictions. More importantly, they create a series of reactionarymeasures by other nations and trade blocs resulting in trade wars(Bozyk, 2012).
Bozyk, P. (2012). Globalization and the transformation of foreigneconomic policy. Burlington, VT: Ashgate Pub.
David, F. R., & David, F. R. (n.d.). Strategic ManagementConcepts and Cases A Competitive Advantage Approach. 15 Edition.Indianapolis: Pearson.