Trade policy is a collection of rules and regulations when pertain to trade. Every nation has some form of trade policy, to help a nation’s international trade run more smoothly by setting clear standards and goals which can be understood by potential partner. Trade policy is a part of import and export taxes, tariffs, inspection regulations and quotas. The purpose of trade policy is to protect their local industries from heavy burden on importers and allowing domestics producers of goods and services to get ahead in the market with lower prices or more availability.
Implementation on trade policy hurts the consumer more than the producers. It is because the consumers need to pay higher prices on the import products due to limits on the competition of foreign countries. Meanwhile, the producers win because they are getting more money for the higher price goods due to foreign competition. Globally, business win because of trade policy which controlled by government and more concerned on producer and not as much for the consumer. By establishing tariffs to protect the competition from foreign country will causes higher prices due to restriction. The importation items have a reverse effect on producing goods efficiently by a domestic business when tariffs are involved. For those countries receiving the importation items much costly compare to the country that exporting the items.
For my point of view, the government should balance the policy on the interest of both businesses and consumers. Due to the economy is changing and the small business is very important for growing sector because it represents growing income for country economy. Thus, it will have an entirely different influence on building policy. Therefore, the government should continue to enforce policies that will protect businesses. So that, worldwide firms are not taken advantage of but help the consumer with pricing goods so they are more inexpensive.
Government intervention on economic argument will saw little benefit in government intervention and strongly advocated a free trade policy. It is concerned with boosting the overall wealth of a nation as benefited for both producers and consumers. Besides that, it can be self-defeating, as it become a protection for inefficient, or triggers trade wars. For instance, if the government does not set any policy to protect the interests of business, it will be effected due to foreign country may take an unfair advantage from home country.
Domestics’ consumers are very sophisticated and demanding if the nation’s firm gain competitive advantage and it is pressure for the local firms to meet high standards of product quality and to produce innovative products. Interests of consumers also need to concern by government. Without consumers best interests being served the government would not have a lot of leverage helping the producers of the marketplace. As a result, it will cause a positive effect determining supply and demand which will then impact the businesses positively. Therefore, free trade policy will benefit the long-term interests of consumers and producers.
Besides that, the government should target technologies that may be important in the future and use the subsidies is to support development work aimed at commercializing those technologies. Export subsidies need to support by government until domestic firms have established first-mover advantages in the world market.it also can justified if the government can help domestic firms overcome the first-mover advantages enjoyed by foreign competitors and emerge as viable competitors in the world market. For instance, according to the U.S. government $15 billion subsidy from the governments of Great Britain, France, Germany and Spain is the achieving Airbus into the world market. Trade Policy in Malaysia
Malaysia is one of the great development countries in the developing world. Trade and investment barriers in Malaysia have been low in relation to other countries in the region except for Hong Kong and Singapore. It is widely acknowledged that this policy stance enabled the Malaysian economy to respond successfully to opportunities arising from increasing internationalization of production and world trade expansion. By implementing the Fair Trade Practices Policy (FTPP), it was helping Malaysia to sustain the economic growth. It was approved on 26 October, 2006 and the objectives of this policy:
1. Promote and protect competition in the market. 2. Create dynamic and competitive entrepreneurs. 3. Provide fair and competitive market opportunities for businesses. 4. Prohibit anti-competitive practices including those originating from outside the Malaysian territory and affecting the domestic territory. 5. Prohibit unfair trade practices in the economy. 6. Promote rights of SMEs to participate in the market place. 7. Promote consumer welfare. 8. Encourage socio-economic growth, generate efficiency and equity. Besides that, Malaysia also Trade Practices Prohibited Under the Fair Trade Practices Bill (FTPB).
The proposed FTPB will help Malaysia prohibit from abuse of dominant position such as a monopoly or monopolization. For instance, predatory pricing, exclusive dealing, excessive pricing and tied selling. If it not control by Malaysia’s government it can lead to inefficiencies and raise costs to the economy and society. Besides that, it also prohibit from hard core cartels whereas in a markets it dominated by few producers and it profitable to collude to fix prices, allocate markets , limit production and engage in bidding in order to maximize their profits. Moreover, the producer might aim to restrict entry of a new firm in the market or cause existing firms to exit the market due to their inability to compete. It also prohibit from anti-competitive practices which the agreement seek to restrain and eliminate competition such as price maintenance, collusive tendering and restraints on production or sale.
Early 1990s, Tun Dr. Mahathir (Prime Minister) came up with a policy blueprint for transforming Malaysia to a developed country status by the year 2020. The contents of the proposal, is the particular those relating to the provision of infrastructure, maintaining macroeconomic stability, human capital development and commitment to a more equitable distribution of fruits of economic growth. It is simply reconfirmed the long-standing commitment of the Malaysian Government to good governance. The new policy also introduced a plethora of new incentives geared to industrial upgrading and strengthening domestic linkages of the manufacturing sectors, which opened up new opportunities for policy-maker desecration. However, the long-standing commitment to private sector oriented growth in the context of an open trade and investment regime continued to remain the basic tenet of Malaysia’s national development strategy.
As conclusion, trade policy is important to encourage socio-economic growth, generate efficiency and equity. Therefore, the government should balance the policy on the interest of both businesses and consumers. To implement development objectives and policies, the government need to ensure that trade regulations and trade measure are negotiated fair and provide the flexibility for both consumers and producers.