Everyone stands to gain if trade relations improve

Benjamin Franklin rightly said, “No nation was ever ruined by trade”. This seems to be fast becoming a mantra as nations experience the revolution in international trade and the power shift among economies. Even countries that have been conservative and traditional in their approach towards international trade are abandoning obsolete and restrictive trade practices to make way for sweeping economic reforms.

At times, some nations focus more on their domestic economy than on fostering a cordial international trade relationship, strongly discouraging the entry of foreign players. Until recently, India maintained strong reservations about throwing open its door to foreign direct investment (FDI). Moreover, a paralysed ruling government, often criticized as being incapable of making any key policy decisions, and which was further being crippled by the coalition, helped keep foreign investors at bay. However, with the next electoral polls round the corner, the Indian government seems to have nosedived into damage control mode and has recently announced a slew of economic reforms, including allowing FDI in multi-brand retail up to 51% and easing FDI restrictions in aviation and broadcasting.

Subsidies and tariffs

However, several nations continue to have economic policies that strongly discourage international trade, in favour of a more internally focused economy. For instance, many nations place steep tariffs on exports or imports from certain nations or industries to restrict or limit entry of foreign players.