Question

Discuss why countries create barriers to trade when economic theory shows trade as being beneficial to a nation. Who benefits from international trade? Who loses from international trade? How can the negative effects of the failures from international trade be reduced? Do you agree with the concept of trade barriers? Why or why not?

Answer 1

It is generally seen that some countries create barriers to trade when economic theory shows trade as being beneficial to a nation because of loss of jobs in the nation and fall in the economic growth and also to protect domestic industries from dumping of products by exporting nations. Recently, the United States of America has increased tariff rate on imported goods from China because government wants to protect jobs in the country as unemployment is increasing in the nation and also for the protection of domestic industries.

It is generally seen that developed and technologically advanced nations having cheap labor force are beneficiaries from international trade. The losers are mainly developing nations having low technological growth. The countries which do not have cheap locally available labor force also loses from international trade.

The negative effects of the failures from international trade can be reduced of nations consider the option of trade barriers only as a short term solution to the problem of employment loss and protection of domestic industries. In the short run, the nations can impose tariff on imported goods but in the long run, this will make domestic industries inefficient and lead to loss of overall national output of the country.

Yes, I agree with the concept of trade barriers as a measure to increase output and help domestic industries but only in the short run.It should not be considered as a long term solution of the problem. In the long run, economies should remain open to international trade because international trade is an engine of growth in the economy.