Answer to Question 1
TRUE
Answer to Question 2
Government officials often make trade-related decisions based on political motives because a politician's career can depend on pleasing voters and getting reelected. The main political motives behind government intervention in trade include protecting jobs, preserving national security, responding to other nations' unfair trade practices, and gaining influence over other nations.
Short of an unpopular war, nothing will oust a government faster than high rates of unemployment. Thus, practically all governments become involved when free trade creates job losses at home. Ohio lost around 215,000 manufacturing jobs over a recent 14 year period. Most of those jobs went to China and the nations of Central and Eastern Europe. The despair of unemployed workers and the pivotal role of Ohio in presidential elections lured politicians to the state who promised Ohio lower income taxes, expanded worker retraining, and greater investment in the state's infrastructures.
A government interested in preserving jobs might consider local content requirements because often those requirements include local labor. Local content requirements are laws stipulating that producers in the domestic market must supply a specified amount of a good or service. These requirements can state that a certain portion of the end product consists of domestically produced goods or that a certain portion of the final cost of a product has domestic sources. The purpose of local content requirements is to force companies from other nations to use local resources in their production processes-particularly labor. Similar to other restraints on imports, such requirements help protect domestic producers from the price advantage of companies based in other, low-wage countries. Today, many developing countries use local content requirements as a strategy to boost industrialization. Companies often respond to local content requirements by locating production facilities inside the nation that stipulates such restrictions.