Sep 22nd, 2008 by Scott Hebert
It can be proven that free trade is good for any country. The gains to consumers due to free trade outweigh the losses suffered by import-competing domestic industries. Unfortunately, these gains are spread out across many people, while the losses are concentrated in a much smaller group of businessmen and workers (Sawyer & Sprinkle, 2006). Obstacles preventing international economic policy coordination include domestic politics and special interest groups.
Domestic politicians strive to be re-elected. For that reason, they must work hard to keep their constituents happy. To do this, they must enact policies that result in immediate, measurable benefits with long-term costs, rather than policies with immediate costs and long-term benefits. Therefore politicians tend to avoid policies that encourage free trade since their economic results are general felt immediately by domestic workers and producers who must suddenly compete with new imports (Sawyer & Sprinkle, 2006). When it comes time to vote, those workers tend to remember their current losses and disregard future benefits.
Special interest groups have the most to gain when a government implements protectionist policies rather than embracing free trade. Lobbyists for these special interest groups see to encourage the government to adopt tariffs and other barriers to trade in an effort to decrease the flow of incoming products. Well-funded lobbyists have had a long history of success in the United States including the 2002’s increased trade barriers enjoyed by steel industry (Sawyer & Sprinkle, 2006).
Domestic obstacles prevent countries from engaging in coordinated international economic policy-making. Politicians and special interest groups work against the greater good in order to benefit themselves. Unfortunately, the political clout of consumers is dispersed among many people and can not be effectively brought to bear on such these obstacles.
Sawyer, W. C., & Sprinkle, R. L. (2006). International economics, 2nd ed. Upper Saddle River, New Jersey: Pearson Prentice Hall.