Government Influence

on Trade and Regional

Economic Integration
and Cooperative
Agreements
 Contents
1. Introduction
2. Economic Rationales for Government Intervention
3. Non Economic Rationales for Governmental Intervention
4. Instruments of Trade Control
5. WTO
6. GATT
7. Dealing with Government Trade Influences
8. Major Types of Economic Integration: FTA, Customs
Union, Common Market, Coordinate Fiscal and Monetary
Policy, Effects of Integrations
9. Major Regional Trading Groups: The EU, NAFTA,
LAFTA, ASEAN, APEC etc.
10. Commodity Agreements
11. Case Study.
 Concept
In the 1920s, very few people would have identified the
government as the major player in the domestic and
international markets. Today, very few people would doubt
that statement. Influence is the power that someone has over
someone or something. Government influence is the
stimulating, controlling and nurturing the business by the
government. For sustaining domestic corporations and
products and enhancing exports the government influences
on business. Influence may be negative, positive, neutral or
life changing.
Regional Economic Integration is an agreement between
groups of countries in a geographic region, to reduce and
ultimately remove tariff and non-tariff barriers to the free
flow of goods, services, and factors of production between
each other.
A cooperative agreement is a form of assistance. It reflects a
relationship between the fund provider and the recipient.
 The Rationale for Governmental
Intervention in Trade
The rationale for governmental intervention in trade may
be classified on the follwoing two ways:

Economic Rationales Noneconomic Rationales

Prevent unemployment Maintain essential industries

Protect infant industries Deal with unfriendly

Countries
Promote industrialization Maintain spheres of influence

Improve position Preserve national identity

compared to other
countries
 Economic Rationales
A. Economic Rationales
01. To Prevent Unemployment
One of the social objectives of government is to prevent
unemployment. The government can do that through import
restriction. One difficulty with restricting imports to create
jobs is that other countries normally retaliate with their own
restrictions. If import restrictions do increase domestic
employment, then fellow citizens will have to bear the cost
of higher prices or higher taxes.
02. To Protect Infant Industry
The infant industry argument holds that a govt. should shield
an emerging industry from foreign competition by
guaranteeing it a large share of the domestic market until it is
able to compete on its own.
03. To Promote Industrialization
Countries with a large manufacturing base generally have
higher per capita incomes than those that do not. Hence
many emerging economies try to develop an industrial base
by largely regulating imports from foreign producers using
trade protection to encourage local industrialization.
The following are the effects of promoting industrialization
1. Use of surplus workers.
2. Promoting investment inflows.
3. Diversification
4. Greater growth for manufactured products
5. Import substitution versus export promotion
6. Nation building
04. To Improve position compared to other countries
Govt. always wish to improve every sectoral position of the
citizens of the country. It is the main duty of the Govt.
05. To Promot Investment Inflows: Inflows of foreign
investment in the industrial area promote sustainable
growth. Import restrictions, applied to spur
industrialization, may also increase foreign direct
investment. Foreign investment inflows may also add to
local employment, which is attractive to policymakers.
06. Diversification: Prices and sales of agricultural
products and raw materials fluctuate very much, which is a
detriment to economies that depend on few of them. Price
variations due to uncontrollable factors, such as weather
affecting supply or business cycles abroad affecting
demand, can wreak havoc on economies that depend on the
export of primary products. A greater dependence on
manufacturing does not either guarantee diversification of
export earnings.
07. To Deteriorate Terms of Trade: Deterioration of
terms of trade may prompt countries to protect and promote
industrialization.
08. Import Substitution versus Export Promotion: Traditionally
emerging economies promoted industrialization by restricting imports
in order to boost local production for local consumption. Some
countries have achieved rapid economic growth by promoting the
development of industries that export their output. This approach is
known as export led development. Industrialization may result initially
in import substitution, yet export development of the same products
may be feasible later.
09. Balance of Payments Adjustments: Governments can improve
BOP by improving their balance of trade. If BOP difficulties arise and
persist, a government may restrict imports or encourage exports to
balance its trade account. One way to do this is to devalue the currency
of the country, which makes all the products cheaper in relation to
foreign products.
10. To Maintain Essential Industries: Governments impose trade
restrictions to improve their essential industries. They also try to
charge higher export and lower import prices.
11. Preserving Cultures and National Identity: A country or
government imposes restrictions on foreign media as they consider it a
threat to their culture and national identity. For example, Malaysia
does not allow public observing other countries movies, programs
wihich are contradictory to Malaysian culture and identity.
 Non-Economic Rationales
1. To Maintain Essential Industries: The essential
industries include defense, education etc. Some of these
industries need to be controlled through government.
Governments apply trade restriction to protect essential
domestic industries during peacetime so that a country is not
dependent on foreign sources of supply during war. This is
called the essential industry argument.
2. Prevention of Shipment to Unfriendly Countries: Here
the government does not wish to supply goods to rival
countries. Countries achieve these political goals using
economic means i.e. trade controls. Countries also start
blacklisting other countries who supply to their rival
countries. Countries concerned about security often use
national defense arguments to prevent the export, even to
friendly countries, of strategic goods that might fall into the
hands of potential enemies or that might be in short supply
domestically.
3. Maintenance or Extension of Spheres of Influence:
Governments give aid and credits to, and encourage
imports from countries that join a political alliance or
vote a preferred way within international bodies. It is
about exporting to another country and in turn
generating employment and BOP. A country’s trade
restrictions may pressurize governments to follow
certain political actions or punish companies whose
governments do not.
4. Protecting Activities that Help Preserve the
National Identity: Govt's role is not only to govern the
country but also to protect the country and put it
together. For this the country requires national identity
and a sense of belongingness. Countries are held
together partially through a unifying sense of identity
that sets their citizens apart from those in other nations.
To sustain this collective identity, countries limit foreign
products and services in certain sectors.
1. Tariff 9. Specific permission
2. Quota Requirements
3. Subsidies 10. Administrative
4. Aids and Loans Delays and
5. Customs Valuation Procedures
11. Countertrade
6. “Buy Local”
Legislation 12. Restrictions on
Services
7. Price Ceilling
• Essentiality
8. Standards • Standards
• Immigrations
1. Tariff: A tariff (duty) is the most common type of trade
control and is a tax that governments levy on a good shipped
internationally. Governments charge a tariff when a good crosses
its official boundary.
i) Export Tariff: Tariffs collected by the exporting country are
called an export tariff. Export tariffs put essential items useful
locally.
ii) Transit Tariff: Tariffs collected by a country through which
the goods have passed are called a transit tariff.
iii) Import Tariff: Tariffs collected by an importing country are
called import tariff. Import tariffs are imposed to make local
production more attractive and competitive.
Tariffs also serve as a source of governmental revenue.
Although, revenue tariffs are most commonly collected on
imports. Tariffs are basically three types:
a) When the government assesses a tariff on a per unit basis, then
it is called specific duty.
b) When the government assesses a tariff as a percentage of the
value of the item, then it is called ad valorem duty.
c) When the government assesses a tariff based on both specific
and ad valorem duty, then it is called compound duty.
 Characteristics of Tariff
1. Tariff can be a fixed amount per physical unit or a
percentage of good’s value.
2. Tariffs reduce volume of trade and raise domestic
prices of imported goods.
3. In the country that imposes the tariff, producers
gain and consumers lose.
4. World as a whole loses, because tariffs decrease
volume of trade and therefore decrease gains from
trade.
5. It is appropriate to restrict trade between or among
the countries.
02. Quotas: The quota is the most common type of quantitative
import or export restriction. By implementing quotas the countries
increase BOP and BOT by decreasing imports and increasing exports.
An import quota prohibits or limits the quantity of a product that can be
imported in a given year. Quotas usually increase the consumer price
because there is little incentive to use price competition to increase
sales. There are different variations of quotas:
i) Voluntary export restraint (VER): Here the government of country
A asks the government of country B to reduce its companies’ exports to
country A voluntarily. Here either country B volunteers to reduce its
exports or country A may impose tougher trade regulations.
A VER is much easier to switch off than an import quota.
ii) Export Quotas: A country may establish export quotas to assure
domestic consumers of a sufficient supply of goods at a low price to
attempt to raise export prices by restricting supply in foreign markets.
The typical goal of an export quota is to raise prices to importing
countries.
iii) Embargo: It is a specific type of quota that prohibits all forms of
trade between the countries. Countries or group of countries may place
embargoes on either imports or exports, on whole categories of products
or specific products with specific countries. Governments impose
embargoes in the effort to use economic means to achieve political
goals.
03. Subsidies : Govt. pays in various ways to local players in
order to make them competitive globally and in turn expect them to
become exporters. Governments sometimes also provide other
types of assistance like business development services (market
information, trade expositions and foreign contacts) to make it
cheaper or more profitable to sell overseas. However trade frictions
result from disagreement on the definition of a subsidy. Subsidies
make local players compete domestically as well as in foreign
markets. Ultimately public pays for these subsidies in terms of
taxes subsidizing less efficient/less competitive industries.

O4. Aid and Loans: Governments give aid and loans

to other countries. It may be tied or untied aid or loans. Tied
aid is given for developing infrastructure and untied aid is
given for purchasing equipment and others. 1 st type slows the
development in developing country and vice-versa.
05. Customs Valuation: The tradition exists for
exporters and importers to declare a low price on invoices in
order to pay a lower tariff. For preventing it (if they doubt)
custom officials must assess on the basis of the value of
identical goods, if not possible, they must assess on the basis
of similar goods arriving in or about the same time.
06. “Buy Local” Legislation: Governments may
purchase goods and services from domestic or foreign
countries. For restriction, any country may adopt “buy local”
legislation i.e., favor domestic products.
07. Price Ceilling: Governments may ceil price for
specific product(s) to restrict specific product (s) to import or
export.
08. Testing Standards: Countries can devise
classifying, labeling and testing standards to allow
the sale of domestic products but obstruct that of
foreign-made ones. It may be:
a) Arbitrary (Issamoto) standards
b) Licensing arrangements
c) Reciprocal (acting in return) requirements
d) Service restrictions
09. Specific Permission Requirements: Some
countries require that potential importers or
exporters secure permission from governmental
authorities before conducting trade transactions.
This requirement is known as import license. This
procedure can restrict imports or exports directly by
denying permission or indirectly because of the
cost, time and uncertainty involved in the process. A
foreign exchange control is a similar type of control.
10. Administrative Delays: International
administrative delays create uncertainty and raise the cost of
carrying inventory. Competitive pressure, however, moves
countries to improve their administrative systems.
11. Reciprocal Requirements: Governments
sometimes require that exporters take merchandise in lieu of
money or they promise to buy merchandise or services, in
place of cash payment, in the country to which they export.
These sorts of barter transactions are called countertrade or
offsets. More frequently, however, reciprocal requirements
are made between countries with ample access to foreign
currency that want to secure jobs or technology as part of
the transaction.
12. Restrictions on Services: Many countries
depend on revenue from the foreign sale of such services as
tranportation, insurance, consultig and banking. Govt. may
restrict the service (s)for various reasons.
Three main reasons for restricting trade in services:
a) Essentiality: Countries sometimes prohibit private
companies, foreign or domestic, in some sectors
because they feel the services should not be sold for
profit. In other cases they set price controls for private
competitors or subsidize government owned service
organizations, creating disincentives for foreign private
participation. Mail, education, hospital, media are often
not for profit sectors.
b) Standards: Governments limit foreign entry into
many service professions to ensure practice by qualified
personnel.
c) Immigration: Governmental regulations often
require that an organization, domestic or foreign, search
extensively for qualified personnel locally before it can
even apply for work permits for personnel it would like
to bring in from abroad. Even if no one is available,
hiring a foreigner is still difficult.
 How to deal with Govt. Influence?
In Govt. intervention in international business the company will go
through the following ways:
Step 1. Know your issues, goals, supporters and opposition: The
more you know about your issue and the clearer you are about what
you want to achieve, the more effectively you will be able to make
your case. To make a strong case for doing something about your
issue, you must present your issue with statistics, information and
stories that show:
i) how many people are affected.
ii) how broad the impact is (for example, it's impact on health,
economy, environment, community, etc.).
iii) how long it has been going on for and what will happen if it is
not addressed by healthy public policy.
Where to get evidence to support your case:
i) Community service directories identify other groups, agencies and
organizations that are working on similar issues/problems.
ii) Population health status data are often available from your local
government statistics agency, public health unit, district health
councils or health research organizations in universities.
iii) Socio-demographic data provide information on key social
and economic variables in your community (e.g. household
income, education level, food bank use). This information can
allow you to compare your community to others in your
province or across the country.
iv) Research studies including needs assessments, research
reports and journal articles can help you to get to know your
issue. This type of information can be located through searches
at reference libraries or keyword searches of on-line databases
such as Medline or PubMed.
v) Newspaper or magazine articles can provide information
about the problem or issue. Paying particular attention to articles
that refer to controversy surrounding the issues will help you to
identify your supporters and/or opposition. Adapted from: Health
Communication Unit at the Centre for Health Promotion,
University of Toronto, 2004
vi) The internet can also be a valuable tool for researching an
issue and examining differing perspectives. Typing key words
into a search engine like www.google.ca can uncover a wealth of
information and ideas. In Section 7 Resources and Tools (page
81), we’ve included a few helpful websites to get you started.
Know who your supporters are
At this stage, it’s also very useful to get to know who your supporters
are and who you might approach as supporters. Contact them and tell
them about the work your group is doing. Discuss how your goals may
be similar to theirs and try to gain their support for your work. See
below for ideas for who your possible supporters might be.
Understand your opposition’s point of view
Getting to know your opposition can help you to understand their
viewpoint —remember, you don’t have to agree with it, just
understand it. This insight can help you to focus your arguments and
activities in the most effective ways. It can also show you what areas
people with other points of view will focus on and help you direct
your research so you’ll have information to counter their position.
Possible supporters:
a) Citizens- community members affected by or interested in the issue
b) Volunteer and Non-profit Organizations- locally, provincially,
nationally and internationally
c) Businesses and Industry
d) University researchers working in the area
e) Media- local or independent media groups, individual journalists
f) Government- departments, divisions, working groups, politicians
g) Professional Associations and Organizations
Step 2: Identify and engage stakeholders and develop networks:
Once you have an understanding of how policy is made, and who
makes policy related to your issues your next move is to “advocate” to
get your issue on the agenda of the relevant policy makers.
This is where your research, insight and commitment to your issue pay
off. You can have an impact in policy development if you know your
issue, present your ideas and evidence clearly, and are prepared with
solutions.
Any argument is more persuasive if there are many voices supporting
it. Broad support is particularly important when you are trying to get
your issue on a politician’s agenda. If you can convince a politician that
he or she will please many voters by acting on your issue, you are more
likely to win over the politician. Building networks and involving
groups and individuals who also have a stake in the issue can bring that
“bigger voice” forward.
Politicians may agree to a certain policy action but it may never be
implemented. One big voice, including many stakeholders who are
working on the same issue and advocating for the same cause, can be a
key factor in keeping an issue on the policy agenda. A united,
consistent voice can help to make sure the issue remains in the
spotlight.
Step 3: Know the policy process and the policy makers: The
policy development process at the government level can be lengthy
and complex. It helps to understand how an issue becomes a policy
issue and what happens from there.
Here is an example process of how public policy is made. It shows
how long and complex it can be.
i) Initiation: An issue is brought to the attention of policy-makers
and put onto the political agenda.
ii) Priority Setting: The issue is looked at in terms of the many
competing issues that need to be acted on.
iii) Formulation: Policy goals are set and the policy direction is
developed.
iv) Legitimation: Research is done to determine what has been done
in the past, what has been successful and what hasn't worked.The
policy is written.
v) Implementation: The policy is put into action.(See Activity 4.3:
Using Policy Tools)
vi) Interpretation and Evaluation: Under ideal conditions the
effectiveness and impact of the policy are monitored and evaluated,
however, this is the part of the policy process that often does not
occur.
Who are the key policy makers?
a)Local - Mayor, City Councilors, members of special
committees
b)Provincial - MLAs, Premiers, Department Ministers
c)Federal - Senators, Prime Minister, Department Ministers
d)Aboriginal Governance - Chiefs, Council, Minister of
Indian Affairs
 Locating Public Policy Makers
Since all levels of government make public policy, deciding which
level of government to approach is a critical step. You need to locate
the people who are responsible for developing policy on the issue you
are interested in. It helps if he or she is interested in your issue and
willing to move it forward on the policy agenda. But even if the policy
maker is not initially sympathetic, it’s your job to try and change his or
her mind!
It’s a good idea to establish and maintain good relations with the policy
makers you deal with —whether they agree with you or not.
Influencing policy can sometimes take a long time, and in the long run
you’ll be more effective if you make as many friends —and as few
enemies —as possible.
TEP 4: Take Action!
At this point, you’ve identified your issue, done your research, and
identified the relevant policy makers, stakeholders and potential
partners. The next step is to develop an action plan. This requires
developing an action plan. You need to decide:
i) Why are you doing this?: What's your long-term goal? It's always
good to know where you're headed. If you lose sight of this, you can get
bogged down in details and become discouraged.
ii) What will you do now?: What's the first task toward achieving
your long-term goal? For example, your long-term goal might be to
have Income Assistance rates raised to the point where recipients can
buy healthy food. But you won't achieve that in a day. So you can
break it down into a series of short-term activities that all lead toward
that ultimate goal. So your first step might be to hold a public meeting
to raise awareness of the issue. Or it may be to arrange a meeting with
a local politician to talk about the issue. Section 6 talks about
strategies for action.
iii) Who will do it?: Who is the best person - or persons - to do this
task? Keep in mind that some activities - for example, a workshop -
require a lot of advance planning and organizing. You need to figure
out all the tasks involved and assign someone to do each one. In the
case of a workshop, you need to know: Who will invite people to
participate in the workshop? Who will find a facilitator? Who will
find a location? Who will see if participants need transportation? Who
will handle food? Will you need childcare? Who will set the agenda
for the day?
When planning any kind of activity involving more than one person,
you will also need a coordinator - someone whose job it is to keep
track of what's being done and make sure all the pieces come together
as planned.
iv) How will we do it?
What tools will each person need to achieve their task?
v) When will it be done?
Every task needs a completion date. A coordinator
comes in handy for keeping everyone on track and on
time.
vi) What resources and supports do we need?
Resources can be both human - people with the skills
you need - and material - for example, meeting space,
refreshments, use of photocopier, etc. Partners are a
good source of support and assistance.
vii) What's next?
Policy change happens when people keep working
toward it. Every activity leads into the next and it's
important to keep the cycle and momentum going
forward. So after every action, take stock, celebrate
your success and plan your next move.
 Argument Against Protectionism
1. Market distortion and loss of allocate efficiency:
Protectionism can be an ineffective and costly
means of sustaining jobs.
– Higher prices for consumers: Tariffs push up the prices for
consumers and insulate inefficient sectors from genuine
competition. They penalise foreign producers and
encourage an inefficient allocation of resources both
domestically and globally.
– Reduction in market access for producers: Export
subsidies depress world prices and damage output, profits,
investment and jobs in many lower-income developing
countries that rely on exporting primary and manufactured
goods for their growth.
2. Loss of economic welfare: Tariffs create a deadweight
loss of consumer and producer surplus. Welfare is reduced
through higher prices and restricted consumer choice. The
welfare effects of a quota are similar to those of a tariff –
prices rise because an artificial scarcity of a product is
created.
3. Extra costs for exporters: For goods that are produced
globally, high tariffs and other barriers on imports act as a
tax on exports, damaging economies, and jobs, rather than
protecting them
4. Regressive effect on the distribution of income: Higher
prices from tariffs hit those on lower incomes hardest,
because the tariffs (e.g. on foodstuffs, tobacco, and
clothing) fall on products that lower income families spend a
higher share of their income.
5. Production inefficiencies: Firms that are protected
from competition have little incentive to reduce their
production costs. This can lead to X-inefficiency and
higher average costs.
6. Trade wars: There is the danger that one country
imposing import controls will lead to reciprocal action
by another leading to a decrease in the volume of world
trade.
7. Negative multiplier effects: If one country imposes
trade restrictions on another, the resultant decrease in
trade will have a negative multiplier effect affecting
many more countries because exports are an injection
of demand into the global circular flow of income.
8. Second best approach: Protectionism is a second
best approach to correcting for a country's balance of
payments problem or the fear of structural
unemployment. Import controls go against the
principles of free trade. In this sense, import controls
can cause government failure.
9. Hampering Economic Nationalism: Economic
nationalism describes policies to protect domestic
consumption, jobs and investment using tariffs and
other barriers to the movement of labor, goods and
capital. Restrictions may go against economic
nationalism. Due to protectionism domestic
consumptions may be lower, employment may be
downward and investment may be deteriorated.
 Arguments in Favor of
Protectionism
Economic arguments in favor of protection policy are:
1. “Infant Industry” Argument
2. “Diversification of Industry” Argument
3. “Promotion of Employment” Argument
4. “Balance of Payments” and “Terms of Trade” Argument
5. “Pauper Labour” Argument
6. “Anti-Dumping” Argument.
1. “Infant Industry” Argument: It is held that infant industries
during the early stages of their development require
protection from competition from foreign exporters. An infant
industry is one which has been started rather late or newly,
and which has not been mature enough to face competition
from long-established foreign industries.
2. Diversification of Industry: When there is unbalanced
economy as a result of excessive specialization,
excessive specialization leads to over-dependence of a
country on other countries. This is dangerous politically,
as well as economically. Politically in times of war,
imports from foreign countries become difficult and
people have to suffer hardships.
3. Promotion of Employment: It is believed that
imposition of tariff leads to expansion of employment
and incomes. The belief was extremely popular in the
thirties, the period of the Great Depression, when
cyclical unemployment was prevailing throughout the
world. Tariff was then regarded as a fairly practicable
means of lessening cyclical unemployment.
4. Balance of Payments and Terms of Trade: Tariff duty
has been advocated as one of the most effective
implements to correct disequilibrium in the balance of
payments. Restrictions on imports through tariffs may
become inevitable in a country if it does not possess
sufficient reserves of gold or foreign exchange to make
disbursement with the surplus country.
5. Poor person Labor: Protection is sometimes advocated,
especially in the industrially advanced countries, in order
to safeguard the interests of labor. It is argued that in the
absence of protection, there will be an unhealthy
competition faced by countries having dear labor
economy from those having cheap labor.
The product of high wage labor of these countries will be
undersold by the “pauper labor’ countries.
Thus, in the advanced countries where the people enjoy
high real wages, it is often felt that their standard of
living will be undermined if cheap goods are imported
from low wage countries. Hence, to protect a country’s
high standard of living and maintain its high wages,
tariffs become essential to rule out competition from
“pauper labor” countries.
6. Anti-Dumping: Protection is also advocated as an
anti-dumping measure. A foreign country may resort to
dumping with a view to capturing markets in another
country. Thus, a high tariff may be demanded in order to
protect home producers against dumping of foreign
goods in the home market at a much lower price and
than what the foreign monopolist charges in his own
country.
 Types of Regional Economic Integration
1. Free Trade Area (FTA): A free trade
area represents an economic bloc in which all barriers
to trade are abolished among member countries, but
each member maintains its own independent external
trade barriers beyond the bloc.
2. Customs Union: A customs union represents
an economic bloc in which all barriers to trade are
abolished among member countries, and common
external barriers are levied against non-members.
3. Common Market: A common
market represents an economic bloc in which all
barriers to trade are abolished among member countries,
common external barriers are levied against non-
members and restrictions on the internal flows of capital
and labor are abolished.
4. Economic Integration: Economic
integration, i.e., an economic union, represents an
economic bloc in which members abolish all
barriers to trade and flows of capital and labor
within the bloc; establish common external trade
and investment barriers; harmonize commercial,
monetary and fiscal policies; establish a common
currency and establish a supranational political
structure to deal with economic issues. (The limited
degree of political integration represents a tradeoff
between the loss of sovereignty on the one hand,
and economic gains on the other.)
 The Effects of Economic Integration
Regional economic integration can affect
member countries in social, cultural,
political and economic ways.
Static effects represent the shifting of
resources from inefficient to efficient firms
as trade barriers fall.
Dynamic effects represent the impact of
overall growth in the market, the
expanding of production, the realization of
greater economies of scope and scale and
the increasingly competitive nature of the
market.
 Different Terms
• WTO = The World Trade Organization
• GATT = General Agreement on Tariffs and Trade
• FTA = Free Trade Area
• EU = European Union
• NAFTA = North American Free Trade Agreement
• LAFTA = Latin American Integration Association
• ASEAN = Association of Southeast Asian Nations
• APEC = Asia-Pacific Economic Cooperation

Special Sheet/Soft Copy will be Supplied.

 Commodity Agreements
Commodity agreements are arrangements between
producing and consuming countries to stabilize markets and
raise average prices. Such agreements are common in many
markets, including the market for coffee, tea, and sugar.
Example – The International Cocoa Agreement
In 2003, an agreement was made between the seven main
cocoa exporting countries, Cameroon, Ivory Coast, Gabon,
Ghana, Malaysia, Nigeria and Togo, and the main importing
countries including the EU members, Russia, and
Switzerland. The main purpose of this agreement was to
promote the consumption and production of cocoa on a
global basis as well as stabilize cocoa prices, which had
been falling steadily. The agreement was planned to
continue until 2010, but in that year it was decided to extend
the agreement for a further two years, until 2012. In 2012
the signatories decided on a further extension, until 2026.
 Questions
1. Discuss economic rationales for government
intervention on trade.
2. State Non-economic rationales for government
intervention on trade.
3. Identify and explain instruments of trade control.
4. Give arguments in favor of protectionism
5. Provide arguments against protectionism
6. Write down the different types of regional
economic integration.
7. What are the effects of economic integration?
8. Write short notes on:
GATT; WTO; FTA; EU; NAFTA; LAFTA;
ASEAN; APEC.
9. Explain the term commodity agreements with example.