On The Economic Rationality Of Strategic Trade Policy And Its Application

Strategic trade policy is the conclusion of New Trade Theory based on imperfect competition and economics of scale. The economic reasonability of strategic trade policy can be obtained from three aspects. First, it doesn't violate the law of comparative advantage, and is the necessary amendment and complement of free trade policy. Second, it is caused by the government's tending towards benefit, which accords with the assumption "Economic Person" in economics. Third, the existence of strategic industries makes it possible to gain profit by supporting them. Although imperfect competition and economics of scale are the prerequisite, the result is restricted by some economic and politically economic conditions. Our country can apply strategic trade policy to some industries, but we should pay attention to its harmony with industry policy. The model shows that imposing optimum tariff on import cars will bring China 38 million Yuan as net welfare, and after entry into WTO there is room for us to lower tariff of car.