How is strategic trade policy different from a free trade system?
What are the advantages of each? Give an example of U.S. participation in strategic trade policy and an example of U.S. participation in a free trade system. In your opinion, should U.S. foreign policy focus more on strategic trade policy or on promoting a free trade system? Why?
Answer: An ideal response will:
1. Note that a country uses strategic trade policy to bolster a specific industry. This is inconsistent with a free trade system in which government does not help or hinder firms within its borders.
2. Identify the main advantage of strategic trade policy, which is to help a domestic industry in a way that is in the national interest.
3. Identify the main advantage of a free trade system, which is the creation of a larger marketplace for goods and services. This reduces expenses for businesses and lowers costs for consumers.
4. Provide an example of a U.S. strategic trade policy, such as U.S. government support for the automobile industry.
5. Provide an example of U.S. participation in a free trade system, such as U.S. participation in NAFTA.
6. Provide an argument for why the United States should focus more on strategic trade or free trade. Strategic trade advocates may argue that such policies strategically help the U.S. economy exactly where it needs the most help. Free trade advocates will focus on the ability of free markets to provide the highest quality goods and services at the lowest cost.
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