Posted on

Commercial Policy in International Trade

Commercial policy in international trade refers to the sum total of actions that a country undertakes to deliberately influence trade in goods and services. Commercial policy aims at regulating trade and protecting the economy.

Objectives of Commercial Policy

1. Protection of infant industries:
The use of tariffs and other protective instruments would protect young domestic industries from foreign competition to enable them to grow to maturity.

2. To raise the level of domestic employment and income, protection of the economy would enable domestic industries to grow.

3. To regulate the consumption pattern:
Protective devices are used to prevent the importation of harmful and dangerous goods into a country. Drug abuse is only possible when the drugs are available. Total ban on harmful commodities will discourage the consumer.

4. To prevent dumping:
The use of quota, high tariffs and other instruments would prevent the dumping of foreign goods that will have devastating effect on home goods.

5. As a retaliatory measure:
Government can use commercial instruments to retaliate against countries which enforced high tax or imposed high quota on its goods.

6. Diversification of the economy:
The use of commercial policy instruments are sometimes used to enable the economy to be more broad-based.

7. To raise revenue:
Government uses commercial instruments to raise more to finance various development projects.

8. To improve the balance of payment:
Protective devices are used to reduce imports and improve the balance of payment.

High tariffs will discourage importation. This will prevent a deficit in the balance of payment.