International Trade Policy Writing Assignment

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Introduction
In the past two centuries, trade between countries has dramatically grown, transforming the global economy massively. Currently, about 25% of total global production is exported (World Trade Organization 7). Countries transact both tangible products such as crude oil, agricultural products, and electronics and intangible commodities such as tourism, labor, and financial services. As time goes by, the product chains for such goods and services are increasingly becoming complex and global. It is estimated that approximately 30% of the value of international exports comes from imports (World Trade Organization 7). Most economic theories postulate that for trade between particular countries to occur and each nation to benefit, all countries must specialize in producing what they are relatively more efficient at depending on their resources. This principle is referred to as comparative advantage. The current study aims at applying the theory of trade policy to explain how countries benefit or suffer while trading with one another.
International Trade Policy
The international policy consists of laws relating to global trade, which are associated with the exchange of goods and services such as export/import regulations, subsidies, and taxes (World Trade Organization 12). Trade policy is made up of the three main instruments, which include tariffs, quotas, and export subsidies. There two types of tariffs, specific and ad valorem. Specific tariff refers to the fixed charge put on every unit of imported goods, whereas ad valorem is percentage tax put on the value of imported commodities. The quota is an element of trade policy that is a measure of the maximum amount of a particular commodity that can be imported (World Trade Organization 12). Export subsidies refer to government support to encourage the export of commodities and discourage the sale of such commodities in domestic markets. In the following paragraphs, the paper will explain the concept of tariffs and how it affects trade between countries.
Import tariff can be beneficial to large countries and detrimental to small ones as far as importation of a particular commodity is concerned (World Trade Organization 13). When a country is denoted as large, it does...