Question

SPAIN:

1.How does the government influence trade? What kind of instruments does it use to limit trade ? (e.g. tariffs, subsidies, import quotas.) Do they encourage or restrict foreign direct investments? How?

2.Is spain a member of any trade agreement ? When did it join ? What was the goal of the trade agreement? (e.g. tariff reduction goals) Has the trade agreement helped or hurt the economic development of the country?

Answer 1

Answer 1

Government influences trade by policies such as tariffs, import quotas, export quota, giving subsidies, voluntary export restraint, local legislation, license etc. By applying these policies government influence the trading of goods and services in the international market. These policies either can enhance or contract the trade. To limit trade government uses policies such as import quota, tariffs, voluntary export restraint. Limiting trade can make the MNC’s invest directly in the country. If the country makes imports more expensive then the company would likely invest directly in the country and trade goods at a rate by which they can make larger profits. So limiting trade should encourage foreign direct investment.