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What is Trade Policy?

Mary McMahon
Updated May 16, 2024
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Trade policy is a collection of rules and regulations which pertain to trade. Every nation has some form of trade policy in place, with public officials formulating the policy which they think would be most appropriate for their country. The purpose of this policy is to help a nation's international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually beneficial trade policies.

Things like import and export taxes, tariffs, inspection regulations, and quotas can all be part of a nation's trade policy. Some nations attempt to protect their local industries with trade policies which place a heavy burden on importers, allowing domestic producers of goods and services to get ahead in the market with lower prices or more availability. Others eschew trade barriers, promoting free trade, in which domestic producers are given no special treatment, and international producers are free to bring in their products.

Safety is sometimes an issue in trade policy. Different nations have different regulations about product safety, and when goods are imported into a country with stiff standards, representatives of that nation may demand the right to inspect the goods, to confirm that they conform with the product safety standards which have been laid out. Security is also an issue, with nations wanting to protect themselves from potential threats while maintaining good foreign relations with frequent trading partners.

When nations trade with each other regularly, they often establish trade agreements. Trade agreements smooth the way for trading, spelling out the desires of both sides to create a stronger, more effective trading relationship. Many trade agreements are designed to accommodate a desire for free trade, with signatories to such agreements making certain concessions to each other to establish a good trading relationship. Regular meetings may also be held to discuss changes in the financial climate, and to make adjustments to trade policy accordingly.

For lay people, understanding trade policy can get quite complex. The relevant rules, regulations, agreements, and treaties are often scattered across numerous government documents and departments, from State Departments which handle foreign policy to economic departments which deal with the nuts and bolts of things like converting currency. Often, the best resource for information is documents pertaining to specific trade agreements, such as the North American Free Trade Agreement. These documents spell out the policy of the nations involved in one convenient location, although the language used can become very complex.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By Fiorite — On Oct 01, 2010

One important area of foreign trade policy that was not mentioned in the article is the use of trade policy to exact penalties on "bad" countries. Trade sanctions are used to put economic pressure on a country, but only work if it is a multilateral agreement.

These types of sanctions can also become tricky situations for multinational companies to navigate. For example, China's trade restrictions with Taiwan put Boeing in a very tough situation. Boeing is a federal military contractor, and when the U.S government decided that it would sell military vehicles to Taiwan, Boeing was forced to comply or risk losing its U.S. arms contract. On the other hand, China was threatening to cancel Boeing's very lucrative contract and kick them out of the country if the company went through with the sale of military aircraft to Taiwan. I am not sure how this resolved itself, but it must have been a headache for Boeing management.

By GlassAxe — On Oct 01, 2010

@ Anon76228- A passport is only one-step in the process to be able to work in Canada. If you are planning on working in Canada, you will likely need a temporary work permit, and a work Visa unless you are planning to do a daily commute. If you are planning on Working in Montreal or anywhere else in Quebec, you will also need a Quebecois work permit.

The process can be a bit lengthy, and you will need a slew of different documents to get the permit. You will also need to pay a fee, and get any required documents from your prospective employer. Finally, you will need to undergo a background test, and if any criminal records show up, expect your permit to be delayed, if not denied.

By anon76228 — On Apr 09, 2010

I have an american passport. does this mean i can work in canada?

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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