Question

Outline and explain five (5) reasons for International Trade.

2. Critically discuss the economic rationales for Governments to intervene in international trade which would affect their country.

3. Explain the concept of a trade embargo and its effect on the country where the embargo has been placed. You must provide examples to justify your points for each question.

Answer 1

Question One 

Differences in technology- Gainful trade can happen amid nations if the nations vary in their technological aptitudes to produce services and goods. For example, poor countries can be empowered technologically. 

Dissimilarities in resource endowments- Valuable trade can happen amid nations if the states vary in their bequests of resources. For example, a state can obtain a scarce good or service.

Variances in demand- Beneficial trade can happen between states if demands or predilections vary between states. For instance, persons in diverse states may have varied likings or demands for numerous products.

Existence of economies of scale in production- The reality of economies of scale in production is adequate to create advantageous trade between two or more countries. 

The existence of government policies-State subsidy and tax programs modify the prices charged for services and goods. For example, such variations can be adequate to create advantages in the manufacturing of assured products.

Question Two 

Globally, governments intervene by trying to fight market inequities through taxation, regulation, and subventions. For example, removing trading barriers. Governments likewise intervene in markets to advocate for general economic equality. Hence, maximizing social welfare among states. For instance, breaking up monopolies and amending negative externalities including pollution. Additionally, governments may occasionally intervene in markets to endorse other goals namely national unity and progression. However, there are negative impacts when a government intervenes in international trade. For example, the intervention can lead to government failure, lack of inducements, political pressure clusters, less choice, and eventually impacting negatively on personal freedom.

Question Three

The concept of a trade embargo is the complete or partial exclusion of trade and commerce with a specific state/government or a cluster of countries. There are negative effects of the trade embargo. A trade embargo works by captivating the aptitude to trade services and goods away from that state. When the capability to trade in a required service or good is taken away from a nation, it can have undesirable effects on its economy. For example, it can generate shortages and monetary downturns.