How does a command economy handle international trade?

In a command economy, the government has complete control over the allocation of resources and the production of goods and services. This means that the government also has control over international trade.

In a command economy, the government typically sets strict regulations and controls on international trade. They may impose tariffs, quotas, or other trade barriers to protect domestic industries and control the flow of goods and services across borders. The government may also establish state-owned enterprises to handle international trade activities.

One of the main objectives of a command economy is often self-sufficiency and economic independence. Therefore, the government may prioritize domestic production and limit imports to protect domestic industries and reduce reliance on foreign goods. This can lead to limited access to foreign markets and a focus on exporting only specific goods or services that the government deems necessary or profitable.

The government in a command economy may also engage in centralized planning of international trade. They may determine the types and quantities of goods and services to be traded, as well as the countries with which trade will be conducted. This centralized planning allows the government to control the balance of trade and ensure that the country's economic goals are met.

However, it is important to note that command economies often face challenges in international trade due to their lack of market mechanisms and flexibility. The absence of price signals and competition can lead to inefficiencies and difficulties in determining the true value of goods and services in international markets. This can result in imbalances in trade and potential economic distortions.

Overall, in a command economy, the government plays a dominant role in handling international trade through regulations, controls, and centralized planning. The focus is often on protecting domestic industries, achieving self-sufficiency, and meeting the country's economic goals.