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Limits And Difficulties In Implementing The Strategic Trade Policy

  • 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)

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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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
Contact details of provider: Web page: http://cse.uaic.ro

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  1. Anthony Creane & Kaz Miyagiwa, 2005. "Information and Disclosure in Strategic Trade Policy," Emory Economics 0530, Department of Economics, Emory University (Atlanta).
  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.
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  4. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-44, Fall.
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  6. Richardson, J. David, 1990. "The political economy of strategic trade policy," International Organization, Cambridge University Press, vol. 44(01), pages 107-135, December.
  7. Andrew McKay & Chris Milner,, . "Strategic Trade Policy, Learning by Doing Effects and Economic Development," Discussion Papers 97/4, University of Nottingham, CREDIT.
  8. 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.
  9. 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.
  10. 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.
  11. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
  12. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  13. Barbara J. Spencer & James A. Brander, 1982. "International R&D Rivalry and Industrial Strategy," Working Papers 518, Queen's University, Department of Economics.
  14. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
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