3 Things Every Consumer Should Know About Trade Policy

3 Things Every Consumer Should Know About Trade Policy

February 2, 2022 Off By Paul Petersen

It goes without saying that international trade is not a topic a lot of people get excited about. If you are like most people, you find it quite boring. That’s fine, except that trade policy affects you directly. It affects all of us. Its effects are so profound that all of us should consider it when we head to the voting booth.

Politics aside, trade policy can be both good and bad. It pays to understand as much about trade policy as possible so as to maintain a firm grasp on local, national, and global economies. So, where do you stand? How much do you know about trade policy? Below are three things that every U.S. consumer should know:

  1. 1. What Trade Policy Is

In a general sense, trade policy is the overall approach countries take toward trading with one another. More specifically, a nation’s trade policy consists of its laws, tax regimes, processes, and methodologies for initiating and participating in trade. That makes trade policy pretty broad in scope.

Vigilant Global Trade Services says that trade policy includes:

  • Taxation – National governments use their taxing authority to control the flow of imports and exports.
  • Trade Agreements – Nations enter into trade agreements in order to level the playing field.
  • Trade Sanctions – Nations implement trade sanctions in order to influence other nations.
  • National Security – Nations restrict trade in order to protect national security.

This is just a small sampling of the many things that make up trade policy. The point is that trade policy includes just about every action a national government takes to influence trade across borders.

  1. 2. Why Trade Policy Is Developed

There are two ways to look at the question of why trade policy is developed. The simple approach is to acknowledge that global interaction can no longer be avoided. Isolationist policies are not reasonable in a world connected by the internet and intercontinental transportation.

Since global interaction cannot be avoided, global trade really cannot be prevented. Therefore, governments need to develop trade policies in order to have some measure of control over cross-border trade.

A more complex approach to trade policy stipulates that governments develop their policies for multiple reasons. As previously stated, some policies are intended to level the playing field between trading partners. Other policies are designed to protect national security or punish nations that decide to behave badly.

  1. How Trade Policy Affects Consumers

Regardless of whether you prefer the simple or complex approach to why trade policy is developed, understand that it affects every consumer both directly and indirectly. Trade policy manifests itself in many ways at the consumer level; here are just a few examples:

  • Retail Prices – U.S. trade policy places certain taxes on imported goods for the express purpose of making them more expensive than their domestic counterparts. Consumers are directly affected by such policies at the cash register. Retail prices reflect the higher taxes on imports.
  • Inflation – Government policies that encourage trade deficits also encourage inflation by reducing the value of that nation’s currency. The result is often inflation.
  • Lack of Access – When governments restrict trade with other countries, consumers lose access to products and services. Anyone who enjoys a good Cuban cigar fully understands this concept.

Trade policy is not just the stuff of politicians and bureaucrats. They may be the ones who come up with trade policy, but what they do affects every single consumer. That is why it is so important for consumers to both understand trade policy and know what their leaders are doing with it.