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Limits And Difficulties In Implementing The Strategic Trade Policy

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  • Liviu-George Maha

    ()
    (Alexandru Ioan Cuza University of Iasi, Romania)

  • Andreea-Nicoleta Donici

    ()
    (Alexandru Ioan Cuza University of Iasi, Romania)

  • Andreea Maha

    ()
    (Alexandru Ioan Cuza University of Iasi, Romania)

Abstract

This paper provides a critical analysis of the strategic trade policy, in terms of limitations and difficulties involved in its implementation. Even there are many arguments used by its supporters for justifying the importance of this type of measures, it is impossible for the state to formulate useful interventionist policies, given the empirical difficulties involved in modeling markets with imperfect competition. Also, any potential gain created by government intervention can dissipate through the entry of new firms, stimulated by the possibility of such profits, while the need of a general equilibrium increases the difficulty of interventionist process. There are also some risks induced by using strategic trade policy, the risk of retaliation and a trade war with the country affected by the measure and the diversion of government intervention by certain interests, transforming it into an inefficient income redistribution national program.

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Bibliographic Info

Article provided by Centre for European Studies, Alexandru Ioan Cuza University in its journal CES Working Papers.

Volume (Year): 4(4) (2012)
Issue (Month): (December)
Pages: 736-746

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Handle: RePEc:jes:wpaper:y:2012:v:4:p:736-746

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Web page: http://ceswp.uaic.ro/
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Related research

Keywords: strategic trade policy; free trade; retaliation; trade war; general equilibrium; interest groups Romania;

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  1. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  2. Riveiro, Dolores, 2008. "Environmental policy and commercial policy: The strategic use of environmental regulation," Economic Modelling, Elsevier, vol. 25(6), pages 1183-1195, November.
  3. Richardson, J. David, 1990. "The political economy of strategic trade policy," International Organization, Cambridge University Press, vol. 44(01), pages 107-135, December.
  4. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  5. McKay, Andrew & Milner, Chris, 1997. "Strategic trade policy, learning by doing effects and economic development," World Development, Elsevier, vol. 25(11), pages 1893-1899, November.
  6. Anthony Creane & Kaz Miyagiwa, 2005. "Information and Disclosure in Strategic Trade Policy," Emory Economics 0530, Department of Economics, Emory University (Atlanta).
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  8. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
  9. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
  10. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  11. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  12. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
  13. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-44, Fall.
  14. Horstmann, Ignatius J. & Markusen, James R., 1986. "Up the average cost curve: Inefficient entry and the new protectionism," Journal of International Economics, Elsevier, vol. 20(3-4), pages 225-247, May.
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