The Effects of Trade Policy

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The effect of trade policy on economy

By implementation of trade policy would causes the wrong response to perceived trade-related and wider economic concerns and will invariably be counter-productive. More open markets are a necessary but not a sufficient condition for inclusive growth, job creation, and overall prosperity. Complementary policies are also needed. The nature of these complementary policies varies by country, but generally includes: public investments that improve domestic supply capacity (Aid for Trade can be important in this respect), macroeconomic and structural policies and governance institutions that create a positive climate for private investment, and active labour market and social protection policies that facilitate needed structural adjustments (i.e. protect workers, not jobs). In addition, particularly in today’s economic environment, trade and other structural policies have a potentially much more important role to play in boosting growth and jobs, without undue additional stress on budget deficits. While this is best achieved via a strengthened rules-based multilateral trading system, plural literal, regional, and national initiatives are also viable options.

Impacts of trade policy toward economy growth

In OECD (2012) stated that the global expansion of trade has reshaped the world economy. Trade opening has enabled economies to reap the benefits of specialisation and focus more productively on what they do best, through the sectors where they demonstrate comparative advantage. Trade has fuelled competition, innovation and economies of scale, allowing the world to ration its finite resources more efficiently. As a consequence, consumers (both individuals and businesses) have enjoyed lower prices and increased choice, while competitive firms have gained reliable access to needed inputs and larger markets. Greater market openness goes hand in hand with better economic performance in both developed and developing economies...
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