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Business, economics, and politics have always been closely linked. In fact, economics was once referred to as „Political economy” indicating the close ties between politics (government) and economics. For centuries, business people have tried to influence economists and government officials. Backinthe16th, 17th, and18thcenturies, nations were trading goods (mostly farm products) with one another. Businesspeople at that time advocated an economic principle called mercantilism. Basically, the idea of mercantilism was to sell more goods to other nations than you bought from them; that is, to have а favourable balance of trade. This results in а flow of money to the country that sells the most. Governments assisted in this process by charging а tariff (basically а tax) on imports, making them more expensive.
There are two different kinds of tariffs: revenue and protective. Protective tariffs are designed to raise the retail price of imported products so that domestic products will be more competitive. These tariffs are meant to save jobs for domestic workers and to keep industries from closing down entirely because of foreign competition. Without such а protective tariff, the U.S. shoe industry, for example, would have been almost totally taken over by imports. Revenue tariffs, on the other hand, are designed to raise money for the government. Revenue tariffs are commonly used by developing countries.
Today, there is still much debate about the degree of protection that government should practise. For example, the U.S. government is concerned about protecting domestic auto producers and workers from Japanese producers. The government convinced Japanese producers to voluntarily limit the number of Japanese cars sold here.
The term that describes limiting the number of products in certain categories that can be imported is import quota. The United States has import quotas on а number of products such as beef and steel. Over the last eight years, the U.S.’ share of imports subject to quotas or official restraint has grown from 12 percent to18 percent. Again, the goal is to protect industry to preserve jobs. An embargo is а complete ban on the import or export of certain products. The ban on the sale of Cuban cigars in the United States is one example. The United States also prohibits the export of some products. For example, the Trans-Alaskan Pipeline Authorization Act prohibits the export of oil from North Slope fields in Alaska. Another law bans the export of timber from federal lands. The Export Administration Act prohibits exporting goods that would endanger national security (for example, military hardware to the U.S.S.R.). Political considerations have caused many countries to establish embargoes. For example, the United States placed an embargo on grain sales to the U.S.S.R. for а while after it invaded Afghanistan.
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