Essay about Mercantilist: International Trade and Basic Free Trade
Yes, the claims that China is following a neo-mercantilist policy are valid because China has been trying to maintain a trade surplus (which is the definition of neo mercantilist); placing high import tariffs on certain goods (refer to qtn 3). Besides, the cheap currency encourages domestic investments, discouraging imports and also leads to cheap capital exports.
What I found from the internet:
China's commercial engagement with the rest of the world is largely scripted from mercantile theory: export boosting policies that are meant to …show more content…
* Are these policies at variance with the basic free trade philosophy?
YES because government intervention is creating the basis for comparative advantage.
FREE TRADE: Refers to a situation in which a govt does not attempt to restrict what its citizens can buy from or sell to another country.
However, govt policies/govt intervention that draws upon the New Trade Theory to build national competitive advantage in biotechnology would influence what citizens can buy or sell. Hence, these policies are at variance with the basic free trade philosophy.
On the other hand, the consequences of such policies are the same as that of basic free trade philosophy, which are economic gains (higher level of domestic consumption and more efficient utilization of resources which lead to the creation of wealth) and