In Star Wars: Episode I: The Phantom Menace, the Trade Federation blockades Naboo at the start of the film. The opening crawl says the reason for this is due to taxes the Republic is charging. However, it's not really clear to me how this would help them with a taxation issue. Especially since this blockade is apparently secret. When Queen Amidala brings the issue before the Republic Senate, the Trade Federation denies it, so they want the blockade and subsequent invasion to be a secret. If they're blockading due to taxes, wouldn't they publicize this, instead of keeping it a secret? So my questions are, why did the Trade Federation blockade Naboo, and why did they keep it a secret?
The plan was to invade Naboo from the beginning, the blockade was merely an excuse for the presence of the battleships. This is what Qui-Gon and Obi-Wan found in the hangar of the federation battleship while they were escaping assassination.
QUI-GON: Battle droids?
OBI-WAN: It's an invasion army.
QUI-GON: It's an odd play for the Trade Federation. We've got to warn the Naboo and contact Chancellor Valorum. Let's split up. Stow aboard separate ships and meet down on the planet.
As for the issue which brings Amidala before the Republic Senate, it's that the blockade was in fact an invasion.
AMIDALA: Honorable representatives of the Republic, distinguished delegates, and Your Honor Supreme Chancellor Valorum, I come to you under the gravest of circumstances. The Naboo system has been invaded by force. Invaded...against all the laws of the Republic by the Droid Armies of the Trade...
LOTT DOD: I object! There is no proof. This is incredible. We recommend a commission be sent to Naboo to ascertain the truth.
The Trade Federation was hoping it would be too late for the senate to do anything if the invasion was complete before they were notified of it. Or, as a B plan, before the senate decide to assist the peoples of Naboo.
NUTE GUNRAY: The invasion is on schedule, My Lord.
DARTH SIDIOUS: Good. I have the Senate bogged down in procedures. By the time this incident comes up for a vote, they will have no choice but to accept your control of the system.
Naboo is a world rich in Plasma, and It would be a great asset for the Trade Federation. Damask Holdings, the plasma mining company owned by Darth Plagueis, was active on Naboo and that's how Sidious was recruited.
Finally, while the choice of Naboo is defensible on an economic standpoint, it was selected by Darth Sidious because the resulting crisis would propels his Palpatine alter-ego to the chair of the Supreme Chancellor.
Darth Sidious told them to.
It really is as simple as that - they were sick of the taxes the Republic levied, and Sidious sold them on a plan where, if it had succeeded, they would never have had to pay Republic taxes again.
Plus, I'm sure the net gain they could get from looting, ransoming, or running Naboo would have been significant enough to drive them to it, once Sidious assured them he could keep the Senate off of their backs.
The whole point of the invasion from the beginning was to generate sympathy for Palpatine in the Senate to help him rise to the office of Chancellor. Palpatine, as Darth Sideous, was responsible for tricking the Trade Federation into starting the invasion in the first place. Palpatine had not yet at that time gained full control of the Senate. While it is unlikely that he had planned for the Jedi to be able to free the planet of the blockade, he was still able to turn all the events to his benefit.
I would assume the reason the Trade Federation people are listening to this dark mysterious figure is because he had done incredible things for them in the past. When one of them asks, "Is that legal?" he says, "I will make it legal". So, whoever this person is, they think, he is someone who can make things happen in the Senate for them. Their loyalty and certainty in doing what he says shows this must have been the case in the past. It's the only interpretation that makes sense.
As for why he would try to capture them, and then have them make the vote of no confidence in the Senate as part of his plan, is likely because his plan has many iterations depending on how different events go. There are many places throughout the clone wars when this seems to be the case (he's trying to do something, but then takes advantage another way when things go differently). For example, if the Separatists had won the Clone Wars instead of the Republic, he would never have had to use Order 66 because they separatists would have killed off the Jedi. And, he'd still rule the galaxy anyway as Sideous.
The first thing the Viceroy says is "as you know, our blockade is legal". The blockade isn't secret. The Federation wants to intimidate planets in its dispute against taxation of trade routes, but wants to do it legally. The invasion is also intimidation, the idea is to sign the treaty, then go public with it after the treaty makes the invasion legal.
In order to take over the Republic and make it his Empire, Palpatine needed a few things to happen. First, he needed to be in a position higher than Senator. Second, he needed an army, whether temporary (Trade Federation) or permanent (Republic's Clone Army). Third, he needed the Jedi out of the way. Fourth, he needed a younger more powerful apprentice to help explore the force and maintain his control of the regions soon to be known as the Empire.
Knowing through observation and probably some shady dealings of his own being a Sith Lord, Palpatine knew that Valorum was enslaved by his actions of political corruptness and side dealings with the bureaucrats and that any inaction of Valorum would generate a vote of "no confidence" in how Valorum was to handle the situation. Valorum, though not stated, could have been involved in the Trade Federations' shady dealings and was hesitant to get involved as it could have blown up in his face from others exposing his direct actions in any shady deals. Valorum was caught in a catch 22. If he acted, he could be exposed by his co-conspirators, if he didn't act, any Naboo sympathizers and systems that didn't support the Trade Federation would side against him. Palpatine put Valorum into a real no-win situation while using his planets premeditated plight as bait. So, when Valorum refused to act and let the committee be established, others realized that the vote of no confidence was necessary to eliminate his corruptness and bureaucratic evil in spite of such a overt evil act as a blockade standing in the way of Naboo's freedom. As someone from Naboo, Palpatine was able to generate the sympathy vote because they probably thought that since he was on the receiving end of the blockade, he could be fair as a Chancellor to "end corruption".
Also, his reason for attempting to kill Padme also had two reasons, one, he could permanently eliminate her as someone that might challenge his power and two, he could blame it on the Trade Federation. This was obviously not realized as it didn't happen. The other reason may be that he knew if he got rid of Padme, Anakin would be that much more easily swayed to the dark side that much earlier in the story. Killing Padme, to Palpatine, had no down-side.
As Sidious, Palpatine needed the Trade Federation and their droid army to carry out the remainder of his plan which was to establish a Army of the Republic, which would then become his Stormtrooper force when the Republic was reorganized from Republic to Empire. It would be an easy sell to the other systems, "Look an army is taking over and threatening other systems ... and we don't have an army to stop them". When the clone army was established and proved to be useful, Palpatine dispathed his new apprentice to eliminate the Trade Federation and all proof between Sidious and the Trade Federation or at least by the time it was exposed, it would be too late. Palpatine was obviously smart enough to realize that using the greed of the Trade Federation against them also enslaved them and destroyed them by putting them also in a no-win situation. Once the Clones proved their effectiveness, the programming of the clones, Order 66 was executed and the Jedi were eliminated. Which would be another reason to get rid of any ties to the Trade Federation. The Trade Federation would begin to ask questions or might even refuse orders out of fear, like kill all the Jedi, where the Clones were programmed not to. It's my opinion that Order 66 was something that was programmed into the clones and that their loyalty was too the Chancellor of the Republic, years and years of brainwashing and programming. Since they were raised to be docile to authority and not question their orders in spite of any moral issue.
The one thing that Palpatine was excellent at was using evil against evil to win. In the eyes of the regular person, Palpatine was someone known to eliminate evil (Valorum, Trade Federation, the perceived Jedi Counsel attempt at taking over the Republic) and bring good (an Army to ensure security and protection, eliminate the Jedi threat, end a war).
Palpatine's plan to get the Republic to distrust the Jedi worked just as beautifully as his other schemes. Now that the Jedi knew that Chancellor Palpatine was the Sith Lord, the Jedi would have to intervene in the transition of power from taking the power from Palpatine and then the Jedi holding some form of election for a new Chancellor. He spun this in a way that the Republic thought that the Jedi, who were now Generals in the Republic's Army, were going to overthrow the Republic and form a coup.
By the time all of this was done, people had to think that Palpatine was a messiah type figure with everyone's best interest at heart and a real do-gooder. All the while, as we know, he was the most evil person known in that galaxy.
All of this happened at the same time he was seducing and manipulating Anakin.
So, why use the Trade Federation? The droid army, a perceived threat to create a docile Clone army, and they were easily manipulated because of their greed.
The whole thing as a ruse, perpetuated by Sideous to manipulate Amidala into calling for the No Confidence vote in Chancellor Valorum. Once Valorum was out, that prompted the emergency election for a replacement. In addition to his diplomatic skills, targeting Naboo also gave Palpatine a strong sympathy vote for taking the Chancellorship himself.
The Federation was a pawn in Palpatines scheme to control the senate. He used them to sway Queen Amidalla to think the senate was ineffective and sway her and her loyal delegates to help him get control. He used the Federations greed against them for his own purpose and then turned around and revoked their trade rights. Killed two birds with one stone by gaining control of the senate and disbanding the very powerful Trade Federation
In addition to what's been said above, you can read Cloak of Deception (written by James Luceno who wrote Darth Plagueis) where they talk about the Republic's taxation of the Outer Rim systems and how the Trade Federation began funding their massive droid armies.
This is addressed by Pablo Hidalgo in Star Wars Insider #81
Q. I was watching Episode 1 and started to wonder why the The Federation was blockading Naboo. There's Iwo questions hidden in this one “Why a blockade?” and “Why Naboo?”
PH: The Blockade was a surprisingly volatile reaction from the normally skittish Trade Federation It was a calculated protest against the increased taxation of outlying trade routes, a move by the Republic that cut into the Trade Federation profits. The Niemoidian officials, who had a stranglehold on major shipping throughout the Galaxy wanted to flex their muscles in front of the Republic and did so by targeting an out-of-the-way world dependent an the trade they facilitated. They could have targeted larger worlds, but that would have garnered bigger risks of backfire and Republic retaliation.
So why Naboo? It was small yet known, in the public eye yet a fair distance away. Its representative in the Senate, Palpatine, had a part in the taxation measure, so the message of retribution couldn't be missed. And, conveniently enough, their secret benefactor Darth Sidious, provided the Trade Federation schemes with all the intelligence data they needed to make for a very easy and very profitable endeavor.
Or at least that was the plan. Anakin and Amidala managed ta derail this scheme.
The point of the invasion of Naboo from the perspective of Palpatine was definitely so that he could gain a sympathy vote in the Senate and be named Supreme Chancellor. His reasons for ordering Nute Gunray and Darth Maul to stop the Jedi and Queen Amidala from reaching Coruscant however, fail to stand up to any sort of logic or reason. If the Trade Federation or Darth Maul had succeeded in stopping them, the no confidence vote would not have happened and the invasion would have been achieved. Palpatine would be the Senator of a subjugated world- powerless and without political influence.
The point of the blockade and subsequent invasion of Naboo from the perspective of the Trade Federation is never made clear in the movie. People can talk about story lines from books and such all they want, but the fact remains that there is no clear explanation given in the movie. Yes, the Trade Federation obviously always intended to invade at the urging of the Darth Sideous' hologram. As for why they are listening to this mysterious figure in the first place, it is never explained in the movie either.