When a country produces goods in which it has a comparative
advantage and then trades with other countries then it enjoys gains
of trade. Sometimes countries try to obstruct the trade using
barriers like quotas, tariffs, etc. to protect the domestic
industries.
When tax is applied to domestic consumption of those resources that
are important for the production of goods related to national
security, then domestic consumption of such goods decreases and
more resources will be available now for the production of national
security goods. It is considered a better idea than having barriers
because these barriers have two bad effects i.e., they increase the
economic deadweight loss because of an increase in prices which
leads to a decrease in consumer surplus more than an increase in
producer surplus, and it also disturbs the relationship countries
have with each other. The decrease in consumer surplus because of
the application of tax is compensated by government tax
earning.
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