5 Essay Question (Midterm)

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5 Essay Question (Midterm)

5 Essay Question (Midterm)

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  1. What is strategic trade policy? Provide an example. What is Paul Krugmans position on strategic trade policy?

Strategic trade policy is a new concept in trade that emerged in the early eighties and has had influence on designing of world trade policies.  Strategic trade policy is a trade policy which conditions or which changes strategic relationship between two or more firms (Brander, 1995).

5 Essay Question (Midterm)

This implies that strategic trade policy is mainly focused on trade policy when there is an oligopoly.  The relationship between firms or between countries gives motive for regulation through trade policy. Example of strategic trade policy includes subsidies or taxes that are imposed on imports or exports. Strategic trade policy is therefore elicited by the relationship between two countries or firms with the need to regulate trade between the two entities. In his work Krugman has stressed the shifting essence of profits from the foreign to the national firms through adoption and formulation of strategic trade policy. Kraugman has adopted a benevolent neutrality position in view of strategic trade policy.