1)Why advocates of strategic trade policy favor subsidies? (8 points) 5

1)Answer 4: Advocates of strategic trade policy favor subsidies because:

• Subsidies lower the prices of goods and services and increase sits supply as well as demand; when producers are not supposed to pay subsidies, they produce more and set lower prices of their products. On the other hand, when the prices of goods and services are low, people are able to afford those goods and demand more.
• With the help of subsidies, the producer will be able to adopt new technology and produce more efficient goods and services for society.

Answer 5: In the given article, Protecting U.S. Magnesium, management focus was to remove unfair trade practices conducted by Russia and China, increase employment in the home country, increase investments, the imposition of anti-dumping duties, and help the U.S. magnesium industry. Russia and China used to dump magnesium in the U.S. due to which there was a loss of jobs, loss in market share, and lack of profitability in the magnesium industry. In order to solve these problems, the U.S. government decided to put import duties ranging from 50% to 140%.

Answer 6: Political arguments in favor of government intervention in international trade are as follows:

• The first political argument in favor of government intervention will be to protect the jobs in the home country. Government intervention in the international market is important to make sure that domestic producers are not exploited by foreign firms.  
• The second political argument is that government intervention in international trade helps in protecting the sovereignty of the country from foreign invaders.
• Another argument in the favor is, government intervention protects the customer of the home country. Government intervention ensures that products imported in the country are up to the quality standards are not harmful to the customers in any manner.

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