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

Trade barriers are protective measures used by countries i order to protect the domestic producers. When the domestic producers are not able to compete with foreign firms in terms of productivity, cost and quality, the local government takes actions so that the local people employment would not get affected.

The local government and local suppliers benefit from trade barriers as the government receives revenue and local supplier gets protection. The foreign supplier and consumer loses as sales would get reduced and consumer has to pay more for the good

By making the local firm to be competitive through investments, training man power the productivity of local firm can be improved so that it can compete with foreign firms.

No. Trade barriers would increase the deadweight loss, reduce the market efficiecny and would not make local firms competitive.