Political Interference

1. GOOD MORNING

2. POLITICAL
INTERFERENCE IN
MARKETING

3. POLITICAL INTERFERENCE IN MARKETING
A free and efficient market requires many buyers and
sellers with fairly complete information about the market.
Also, the willingness of participants to deal with each other
should not be distorted by political preferences but should
be governed only by price and quality considerations.
Deviations from these conditions called market
imperfections, reduce efficiency.

4. WHY POLITICAL INTERFERENCE IN MARKETING?
 Tariffs raise the price of imported goods
 Governments also intervene in trade policy for
economic reasons
 To protect jobs and overall industries from
international business
 For the protection of national security.
 Political retaliation as part of a foreign policy
 The protection of producers and consumers is
the key reason for government intervention.
 Governments also use trade policies to improve
human rights with other countries.

5. MONOPOLY:
Monopoly is just one supplier of an item, and
can set price quite high. For example De Beers
produces over one third of the world supply
and controls two third of the world markets
for uncut diamonds.

6. OLIGOPOLY:
A monopoly shared by just a few large sellers-
often allowing for tacit or explicit coordination to
force the product up. For example, members of
the OPEC agree to limit oil production to keep
prices up. To the extent that companies band
together along national lines.

7. CORRUPTION:
Another common market imperfection in trade is
corruption; individual receive payoffs to trade at
nonmarket prices, as a result government and
company loss of the benefits, while individual or
official gains increased benefits.

8. TAXATION:
Is another political influence on markets? Taxes are
used both to generate revenue for the
government and to regulate economic activity by
incentives. Government reduce taxes to attract
investors, increases taxes to practice
mercantilism, security reasons and so on.

9. SANCTIONS:
Political interference in free markets is most explicit when government
apply sanctions against economic interactions of certain kinds or
between certain actors. Political power then prohibits an economic
exchange that would otherwise have been mutually beneficial. In 2015,
the United States had trade restrictions on 11 states in response to those
states’ political actions, such as human rights violations. Enforcing
sanctions is always a difficult task because participants have a financial
incentive to break the sanctions through black markets or other means.

10. AUTARKY/AUTARCHY
Definition: A Policy of self-reliance, avoiding or minimizing trade
and trying to produce everything one needs (or the more vital
things) by oneself. Autarky means economic independence as a
national policy, it way to avoid dependency on other states,
especially for a weak state whose trading partner would tend to be
more powerful. Is to avoid trading and instead to try to produce
everything that state needs by itself. Such a strategy is called self-
reliance or autarky. An autarky state’s production cost is very high
and doesn’t have comparative advantage.

11. TRADE
BARRIERS/PROTECTIONIS
M

12. TRADE BARRIERS/PROTECTIONISM
Protection of domestic industries from
international competition, is called Protectionism,
it is contrary to economic liberalism, because
protectionist try to distort free markets to gain an
advantage for the state, generally by discouraging
imports of competing goods or services.

13. TARIFFS:
Definition: A duty or tax levied on certain
types of imports (usually as a percentage of
their value) as they enter a country.
(Joshua.p.262)

14. EFFECTS OFTARIFFSARE MENTIONED BELOW.
 Make imported goods more expensive
 Discourage domestic consumers from
consuming foreign goods
 Encourage consumption and production of
domestically produced
 Save infancy period of infant industries
 Tariffs impose to curb dumping
 To correct a temporary balance of payments
disequilibrium

15. NON-TARIFFS:
Definition: Forms of restricting imports other
than tariffs, such quotas (ceilings on how
many goods of a certain kind can be imported)
(Joshua.p.262)

16. NON-TARIFFTRADE BARRIERS ARE
 Subsidies
 Quotas
 dumping
 administrative and technical restrictions. These
are discussed in detail as under.

17. SUBSIDIES
The subsidies means government’s payment made to
domestic firms to encourage export. It can also act as
barrier to trade. Subsidization allows a domestic producer
to under set foreign competition at home. One reason that
agriculture is one of the least competitive of all trade
sectors is that many governments heavily subsidize their
agriculture industry. It keep domestic prices high

18. DUMPING:
Definition: the sale of products in foreign
markets at price below the minimum level
necessary to make a profit. (Joshua.p.261)

19. QUOTA:
A quota is also non-tariff barriers. It is the limits on
the quantity of import. Quota may be mandatory
or voluntary, i.e. some of these are imposed by
importing countries by many other are voluntary
agreed to by exporting countries rather than face
formal restrictions.

20. QUOTA
METHODS
 mandatory
 voluntary

21. ADMINISTRATIV
E AND
TECHNICAL
RESTRICTIONS
Imports are restricted on the grounds that
 they constitute a health hazard
 they do not meet safety and health
regulations in the country.
Administrative restrictions include
 Labelling
 Packaging
 custom policies.
All of them constitute hidden barriers to
free movement of goods and services
between the countries. Their effects are the
same as that of tariffs or any other
instrument of trade restrictions.