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  1. Describe the nature and main instruments of trade policy.

Economic theories and economic reality provide a critical intellectual foundation — trade takes place as a result of comparative (not absolute) advantage; it is complicated by politics and the urge to practice doityourself economics — economists may disagree about normative conclusions, but tend to be of one view on positive economics; the benefits of international trade, based on international specialization and the division of labour, is one of the most widely held of positive economic ideas. A liberal trade policy can thus have an important impact on aggregate economic welfare (globally and nationally), but the uneven distributive effects can make it difficult to sell to the general public, and thus to political decisionmakers.

Discrimination is the basis of choice, that is, choosing one thing over another thing for whatever reason. Most trade policy involves decisions to discriminate: to discriminate between goods or groups domestically or between services suppliers from different countries.

Trade policy involves

    • values,

    • preferences,

    • priorities, and

    • an institutional setting and social context

  • that can vary from country to country.

Social context, in particular, can have an important bearing on how national values, preferences and priorities are pursued.

Trade policy is designed to meet a country's commercial interest. An increasing reality for trade officials is the need to respond to broader societal interests. Legal Norms and Ideas are critical to putting trade policy into practice. They involve the implementation of rules and the practice of diplomacy.

Trade policy

    • applies to the international movement of goods, services, capital, technology and people.

    • provides the framework for the conduct of trade promotion and trade relations.

The practice of trade policy involves a combination of analysis, consultation, negotiation, implementation, and diplomacy.

In the final analysis, trade policy involves the pragmatic search for solutions to problems in an effort to provide stability and predictability in government policy and trade and investment circumstances.

Institutional context

    • Government policy professionals operate within an institutional setting that influences,

    • constrains, and conditions how they address and resolve issues that cross their desk

Canada, for example, is a constitutional monarchy, a parliamentary democracy, and a federal state. Each of these aspects of the Canadian state create institutions in both the broad and narrow senses of the word. By way of contrast, the United States is a republic, a presidential congressional democracy, and a federal state. The EU is an intergovernmental union of 27 states with a complex mix of supranational and intergovernmental institutions governing their common policies. Most of the Caribbean countries are parliamentary democracies, but operating on a much smaller scale than is the case in the UK or Canada, creating its own constraints and conditioning circumstances.