iovernments of many countries enact policies that can have a major impact on international trade fiows. a. Explain how governments might give their local firms a competitive advantage in the international trade arena. 1. Some govemments can restrict the number of firms that can trade in the global market. 11. Some governments can olfer subsidies to their domestic firms. III. Some governments can forbld settlements in foreign currency to make cash inflows fo firm more stable. IN. Some governments can expand enwironment restrictions to allow local fitms to produce at a low cost: b. Why might different tax laws on corporate income across countries alow firms from some countries to have a competitive advantage in the intemational trade arena? 1. When a government imposes lower corporate tax rates, firms can decrease their after-tax cash flows and therefore decrease their stock valuations for their sharehoiders. 11. When a government imposes jower corporate tax rates, this increases the confidence in the company from foreign consumers giving her advantages in the intemational trade arena. IIt. When a government imposes lower corporate tax rates, firms may be able to charge lower prices for their products and stil make a profit