Question

Question 3 "Trade restrictions should be used to address human rights abuses in the world”. Discuss the arguments for and against this assertion. (20 Marks)

Answer 1

Trade benefits all economies. Free trade is the only way that the world could take advantage of these efficiency.

However there are always special interest group who wish to strengthen themself at the expense of their society by limiting trade so that they can charge higher price for their products and services. Most of them are Unions or Companies that want to prevent competition. And they favour btrade restrictions.

So, the Trade restrictions are government induced restrictions on international trade. There are several forms of restrictions like;

- Tariffs

- Non Tariff barriers to trade

- Import Licenses

- Export Licenses

-Import Quotas

- Subsidi ses

-Voluntary Export Restraint

-Local Content Requirements

-Embargo

- Currency Devaluation

- Trade Restrictions

In favour of Trade Restricted- Following are some reasons which justify the restrictions:

1.Job Preservation- The job preservation argument is often presented by Unions to protect Union jobs.

Unions prevent companies from getting the lowest prices for their inputs and force them to raise prices.

Furthermore, companies are often prevented from using automation or robotics so that unions can preserve jobs

2. National Security- Generally domestic industries do not want competitive with foreign countries. The argument is often made that an industry should be protected for national security.

However some industry like manufacturing H- bombs or printing domestic currency should not be outsourced.

But national security argument can not applied to most goods and services.

3. Infant Industry- The argument is often presented that infant industries should be protected until they can sustain themselves.

The government would have several problems in enacting trade restrictions based on the infant industries.

4. Unfair Competition- Manu people argue that industries in other countries are subsidised by the government or suffer from fewer restrictions giving them an unfair advantage.

For this reason, a unilateral reductions in trade restrictions can be desirable.

Points against trade restrictions-:

1. Trade restrictions discourage free trade and free trade lets the principle of Competitive Advantage work most efficiently.

2. Restrictions raise prices due to less competition or presence of monopoly, therefore decreasing consumers purchasing power.

3.Restrictions cause a limited nchoice of products therefore would force customers to pay higher priced and accept inferior quality.

4. Trade restrictions generally favour rich countries because these countries tend to set international trade policies and standards.

5. Economist agree that trade barriers are detrimental and decrease overall economic efficiency.