Government Business Regulations

Question: Discuss about the Government Business Regulations. Answer: Introduction: Trade protectionism refers to a set of government directives and policies established to restrict unfair trade practices and competition by foreign business organizations. It is basically a politically motivated defensive measures implemented by countries to protect the interest of home grown businesses (Ghibutiu 2013). Various policy instruments used for protectionism are discussed below: Tariffs: These are assortment of various taxes that are imposed on import of goods. It is one of the major forms of protectionism tool intended at protecting local businesses and acts as a source of revenue for the government. The higher tariffs results in the increase in price of imported goods. The elasticity of demand determines the level of success of tariffs because greater the elasticity, more effective the tariffs (Osabouhien Efobi and Beecroft 2014). Quota: It refers to a limit imposed on quantity of imported goods. This is imposed mainly with an objective to promote local businesses and discourage competition from foreign players. Imposing of quota restriction affects neither the price of goods nor it increases the revenue for the government. Embargo: In laymans term, embargo means a hindrance. In business terminology, embargo is defined as a partial or blanket ban on trade and commerce with a particular country or some countries. Embargo is generally imposed as an outcome of hostile economic or political conditions between two countries. Embargo aims to isolate the targeted country and create obstacles for its governing body, obliging it to take action on the core issues that led to embargo. For example, embargo imposed by Australia on Indonesia on livestock due to their brutal techniques of slaughter in their country. (McGovern 2016). Subsidies: It is a payment that is paid by the government to a business or individuals for exporting the goods to another country. Export subsidies offer traders and manufacturers an incentive for exporting, making it more rewarding for them to sell goods abroad and thereby increasing the prices of goods in the home country Exchange Control: This method is used to put restrictions on the amount that can be brought in by the importers. The main objective behind having an exchange control mechanism is to curb the ability of an importer (Cavusgil et al. 2014). Product Standards: Restriction on the basis of product standards are levied for various reasons such as usage inferior raw materials, sub-standard products, product safety and labeling issues. Limiting imports through implementation of such regulations promotes growth of home businesses. Environment Standards: In the current business environment, where climate change and global warming has become a major issue globally, each and every country is taking proactive measures the tackle the effect by implementing stringent environmental laws for the businesses to discourage them from using harmful chemical that affects the environment. Further, such laws also encourage the businesses to use environment friendly business practices and corporate social responsibility for sustainable development (Matsushita 2015). Policy instruments used in competitive market model can be classified under two heads i.e. competition laws and government policies which are discussed below: The government of any country sets regulations and laws to monitor and control unfair trade practices in the market. Competition laws and government policies includes the following aspects Anti-Competition Agreement (Collusion) and Cartels: In order to boost the economy and have a fair competitive market, the government of any country aims to take control over the leading players in any specific industry to restrict them from using their position to discourage other players in the market or increase their prices through the process of cartel and price fixing. Market Liberalization: It involves the introduction of fresh competition in various monopolized markets such as telecommunications, air transport, and many others to support competition and to encourage other small players to enter the market (Feenstra 2015). Merger Control: The government should closely monitor and investigate various mergers and acquisitions that take place between two large firms within the same industry which may be intended at dominance in the market and discourage smaller firms. Foreign Direct Investment: In order to boost the source of revenue for the government and make the economy more flourishing and competitive, the government may choose the method of foreign direct investments by making attractive and flexible policies to attract various multinational conglomerates through to establish new projects (greenfield projects) or acquisition (brownfield investment) in the home country. Consumers Safety: The government of any country through a regulatory body monitors the usage of quality of the raw materials and semi-finished goods used by the businesses operating within the economy that the product is safe for by the consumers. The safety standards by the regulatory authority states various requirements that a business is obliged to follow such as product description, ingredients, date of expiry, labeling issues. The various policy instruments in a competitive market are imposed by any government of any given economy to prevent market inequality through implementation of various laws to regulate the market and promote home grown businesses through subsidies. These instruments intervene in the market to support general economic equality. These instruments aim at raising social wellbeing by disrupt monopolies and regulate adverse external factors. Through the implementation of such instruments, the government makes the businesses provide better services to the consumers. Increased competition gives way to innovation due to increased competition (Bowen Hollander and Viaene 2012). The increased competition due to stringent regulations in the market, business is encouraged towards identifying their strengths and weaknesses as well cultivates the habit of creative thinking as well as it helps them to identify their key customers. The stringent regulations in the competitive market environment enable the businesses to generate new ideas for their products or services through learning and knowledge management and help the employees to be for efficient and productive due to increased competition. It further helps the businesses to grow and expand by focusing on innovation and learning and bring about solution to common problems that are prevalent in that specific industry they operate by working together with the other businesses and the government and all the above activities and efforts leads to better and healthy business environment where all the stakeholders i.e. business, society, customers, government and investors get benefits from it (Cavusgil et al. 2014) . References Bowen, H.P., Hollander, A. and Viaene, J.M., 2012.Applied international trade. Palgrave Macmillan. Bown, C.P., 2014. Trade policy instruments over time.World Bank Policy Research Working Paper, (6757). Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014.International business. Pearson Australia. Feenstra, R.C., 2015.Advanced international trade: theory and evidence. Princeton university press. Ghibutiu, A., 2013. Trade protectionism: An increasing threat to global economic recovery.Knowledge Horizons. Economics,5(3), p.166. Matsushita, M., Schoenbaum, T.J., Mavroidis, P.C. and Hahn, M., 2015.The World Trade Organization: law, practice, and policy. Oxford University Press. McGovern, E., 2016.International trade regulation(Vol. 2). Globefield Press. Osabouhien, E., Efobi, U.R. and Beecroft, I., 2014. Free trade, protectionism and the balance of trade: New empirical insights.Beggar-Thy-Poor-Neighbour: Crisis-Era Protectionism and Developing Countries, pp.13-24.