Political and Legal Environment
Why Governments Intervene in Global Trade
International trading is very important to a nation because it generates business and government revenue and promotes varying levels of trust between trading partners. These levels of trust can have both positive and negative outcomes.
Some nations are better suited for producing certain products/ services that other countries may demand. Nations profit by trading with other nations better suited to producing products in demand.
On the other hand, governmental disagreements may lead to embargoes and the cessation of international trade between the country’s businesses.
Consumers are the main beneficiaries of trade, which also makes them the primary victim of embargoes. Consumers will have to pay higher prices for hard-to-find items if their government imposes an embargo on a country
that is the main producer of the item.1
Political Issues That Significantly Impact Global Business
Governments may also intervene in order to protect their domestic market. A developing market is not ready to fully engage in international trading on its own and may require the protection of the government.
On the other hand, domestic businesses may be ready to begin trading in the international market; however, they may not have the finances needed to undertake the endeavor.
Consequently, some government agencies may choose to financially assist their domestic businesses in order to spur the whole nation’s economic growth.
Governments are also aware of trade deficits that may develop between nations. A
a trade deficit occurs when a country is importing more than it is exporting. The
Government promotion of trade
Government restriction of trade