Trade Policy of UK Essay Example | Topics and Well Written Essays - 2500 words

Trade Policy of UK - Essay Example Secondly, the study also includes the home ownership aspect to the determinants of preferences regarding trade. It indicates that home ownership taken independent of the type of factor has a correlation with trade barrier support in the countries where the manufacturing mix has a concentration in sectors of comparative disadvantage. Here, we see that the preferences have a dependence on the effect of trade policy on the income of factors of production as well as on the economic benefit of the individual. Therefore, the preferences towards trade policy may be as result of not only income of the factors, but also of the ownership of the assets that they possess. However, the assets such as housing do not become a part of the standard theory of trade since it is not employed and nor is it presently produced asset. The study also says that ownership of home is correlated to negative preference for free trade in places having a manufacturing mix that is concentrated in comparative-disadvantage sectors. It is to be noted that when the economy runs on the basis of certain sectors, factors have a direct link in those specific sectors. Hence, it so happens that factors in different sectors show their different preferences i.e. support or negativity. This happens when there is an assumption of immobility of factors between sectors. Here, if the sector is not an exporting one, they prefer protection. However, free trade is the most preferred, if the sector is an exporting one, which means there is negative preference for trade barriers. However, if we assume that factors have mobility, factors who have a higher supply (those factors that are more in number) will have a preference for free trade policy & those which are less in number will have a preference towards protection. The theory on the trade policy indicates that the trade policy is evaluated by individuals in the light of the effect of the same on their incomes. They see whether the effect of the policy is favorable on their income or not and then have a preference towards protection or free trade policy. This does not take into consideration the national welfare. This happens because the income of the factor is affected because of the changes in the relative prices of the products. As seen earlier, we have also taken a view of the mobility of factors of production. The changes in the mobility of factors make an impact on the changes in income and thus influence the decision about trade policy i.e. having a support towards trade barriers or towards free trade. When we talk about the mobility of the factors, we are taking an assumption that the factors can move costlessly amongst sectors. When free trade comes in, not only is product price affected, but there is a change in factor price also. Hence, with the possibility of shifting sectors, the returns rise for the labour. Hence, when this is possible the support towards free trade is higher, since it affects the income positively. This model generally assumes that there is support for protection in the sectors where the factors employed are those which are scarce. The above explanation clearly brings out that the factor type that is abundant will