Some governments that are anxious to expand all sectors of their economy attempt to defend their insurance market by restricting the trader's freedom of choice in the placing of transport insurance. This is done by requiring the buyer or seller to insure his imports in the country of importation or his exports in the country of exportation; by imposing discriminatory taxes on marine insurance placed with foreign companies; or by the operation of their import licensing and exchange control regulations. In so doing, governments overlook the fact that insurance, more than any other transaction, is based on confidence and is thus incompatible with any form of coercion. When insurance affects international transactions, then the need for confidence is all the greater.
Transport insurance of goods has all the elements of an international transaction. The goods themselves move from one country to another, frequently on the high seas. The supplier is in one country, the buyer in another and the carrier may belong to a third country. Consequently, restrictive measures affecting transport insurance inevitably have a direct effect on international trade. It is therefore international trade as a whole which suffers from restrictive measures imposed in relation to transport insurance; and the economy of the country which imposes them loses the benefits to be derived from a free choice of the transport insurance arrangements. If, furthermore, other countries adopt a similar attitude in retaliation, this leads to the paradoxical situation where no commercial transaction remains possible between two countries without violating the law of one or the other.