What is Trade Policy?

Trade policy refers to the principles and principles for the management of foreign trade activities formulated by a government for a certain purpose.

Trade policy

Right!

Trade policy refers to the principles and principles for the management of foreign trade activities formulated by a government for a certain purpose.

Chinese name

Trade policy

Category

Legal policy

Related field

Foreign trade

Regulating Object

Foreign economic activity

(1) Policy subjects. Refers to policy actors, that is, policy makers and implementers, which are generally governments of various countries.

(2) Policy object or policy object. It is the trade activities planned, directed and adjusted by trade policy, and the enterprises, institutions or individuals engaged in trade activities.

(3) Policy objectives. Government's trade policy behavior is a purposeful action. The content of trade policy is first determined under the guidance of certain policy objectives. Therefore, the policy objective is the basis for formulating and adjusting the content of the policy. Determining trade policy goals is a complicated matter in itself. There are both problems of coordination between multiple policy goals and the matching (combination) of goals and means.

(4) Policy content. Which policy is implemented. The content of the policy also reflects the tendency, nature, type, and structure of trade policies.

(5) Policy means or policy tools. That is, in order to achieve the established policy objectives, the foreign trade management measures adopted in implementing the policy content, such as tariff measures, non-tariff measures, exchange rate measures, interest rate measures, tax measures, etc., also include the establishment of a certain trade system.

The object of trade policy adjustment is mainly foreign economic activities. If we refer to other policies that directly adjust domestic economic activities as domestic economic policies, then trade policies can be called foreign economic policies, forming a policy division of labor with domestic economic policies. In this sense, foreign economic policies and domestic economic policies are interrelated, and they all have commonalities as part of a country's general economic policy, such as unified policy goals and certain common policy means. The unity of the two is also reflected in their mutual influence and constraints. In an open economy, total supply is Y = C + S + M and total demand is Y = C + I + X. To achieve a balance between supply and demand, S-I = X-M is required. This economic equilibrium model shows that a country's domestic economic situation and its foreign trade situation are interdependent. Therefore, when the government regulates the domestic economy or foreign trade, it will inevitably affect the use of the policies of the other party.

Trade policy and trade measures are also a pair of concepts that are both related and cannot be mixed. The government's foreign trade management is implemented through various measures. Trade policies are implemented and reflected through trade measures. The two are inseparable. However, they have fundamental differences, which are mainly reflected in:

(1) Trade measures are only management means or policy tools. They reflect the content of trade policies and are the carrier of the policy, not directly equal to the policy itself.

(2) Trade policy is in a decisive and dominant position in foreign trade management; trade measures are determined according to the objectives and contents of trade policy and are in a subordinate position.

(3) As a means and tool, trade measures are neutral in nature, and can regulate foreign trade in different directions; trade policy is a subjective choice of the government, has a clear tendency, and is relatively stable.

(4) Trade measures work in accordance with economic laws and market economic laws. In the process of forming trade policies, many non-economic factors are infiltrated.

Trade policies, like other economic policies, are a form of government intervention in economic activities. In essence, there are two basic aspects to the meaning of policy intervention, reflecting the general meaning of economic policy, including trade policy.

(1) Implement the government's values. Foreign trade is an integral part of an open economy. Under the domination and restriction of economic laws and economic conditions, the development of foreign trade in various countries shows different states. However, this spontaneous development of trade does not necessarily meet social development goals and social needs. That is, the spontaneous development of economy and trade may deviate from the economic goals of the government or society, which requires some way to adjust the direction and state of economic and trade development. In addition, policy goals include non-economic goals in addition to economic goals. The government (society) value judgment of economic development exists, which highlights the necessity of policy adjustment. Policy intervention is an inevitable choice to improve the consciousness and effectiveness of achieving economic and trade development goals, and to exclude the state of spontaneous development.

(2) Make up for market defects. The market mechanism performs uninterrupted spontaneous adjustments to economic operations. However, market regulation itself has many shortcomings, including:

1. Due to the immature development of the market mechanism, or due to the obstruction of the monopoly, the role of the market mechanism cannot be fully exerted.

2. Market failure means that the market mechanism cannot achieve the optimal allocation and fair distribution of resources. When there is a large external economy and external diseconomy, in terms of the supply of public information, in industries with a decreasing average cost, and in large-scale investments with large uncertainties, market mechanisms often cannot adjust the allocation of resources to Best state.

(3) Economic stability cannot be achieved. To overcome the above market defects, human intervention in economic activities is required, that is, government intervention, including the implementation of trade policies.

As a special policy for regulating trade activities, trade policy has its special significance.

(1) Control the convection of domestic and foreign goods to maintain domestic economic order.

(2) Adjust foreign economic relations and avoid excessive international economic frictions and policy conflicts.

(3) Regulate foreign trade activities and assist in achieving overall economic goals, such as expanding exports to drive economic growth, improving the structure of traded goods and promoting industrial restructuring, and introducing competition to weaken domestic monopolies.