Business-Government Trade Relations

Government intervention in Trade: Spotlight on China and Germany

Indeed, there is no such thing as free trade. Governments around the word are obligated to intervene and ensure there are job growth and economic development resulting from trade. A case study of China and Germany show how governments use trade policies and regulations to serve the interests of a country’s firms and industries (Dhas, 2016). An analysis on China implies that the government imposes tariffs and quotas on international investors who view the state as a critical marketplace. Apparently, governments understand that free trade is competitive and endangers growth of domestic industries. Therefore, it is imperative to use restrictions on international investment as seen in China. The Chinese government has ensured that specific industries do not attract foreign investment or requires a domestic-foreign partnership to ensure job safety. Also, both the Chinese and German governments use bureaucratic procedures to ensure that international investment remains regulated and limited. Meanwhile, China and Germany invest heavily in offering domestic industries with subsidies and financial incentives to be competitive compared to foreign firms.

The socialist market economy in China ensures that the government owns public and private companies that are monitored by the communist party. The Chinese government has vested interest in some industries like electronic, mining, and telecommunication that require protection from international competition. The Chinese control of the internet is a deliberate move to ensure that foreign investors have limited access to information to the country’s model of business. The German’s socio marked workshop is similar to China and usually focuses on providing workers with a safety net by devaluing the currency to boost exports. The German model allows cooperation between banks and industries, and this partnership allows the government and banks to offer monetary support and make financial decisions for companies that require protection from unfair international competition.

Reference

Dhas, D. (2016, February 3). Government intervention: Spotlight on China and Germany. [Video File]. Retrieved from https://www.youtube.com/watch?v=eUY1fpJ-6ME