If trade barriers hurt the average worker in an economy (due to lower wages), why does government create trade barriers?

Short Answer

Expert verified
In conclusion, governments create trade barriers despite the potential negative consequences for the average worker due to various reasons, such as protecting domestic industries, national security interests, retaliation against unfair trade practices, and generating revenue. When making decisions regarding trade barriers, governments must weigh the benefits against the potential drawbacks, often influenced by political pressures, economic circumstances, and their overall trade strategy.

Step by step solution

01

Define trade barriers

Trade barriers are government-imposed restrictions on international trade, such as import tariffs, quotas, and non-tariff barriers. These barriers may result in higher prices of imported goods and services, hence reducing the demand and increasing the price of locally produced goods.
02

Identify negative consequences of trade barriers for the average worker

Trade barriers may hurt the average worker in an economy due to several reasons. They can lead to higher prices for imported goods and less consumer choice, resulting in a decline in purchasing power. Moreover, trade barriers may lead to retaliation from trading partners, resulting in reduced exports and job losses in sectors reliant on international trade.
03

Analyze reasons why the government creates trade barriers

There are several factors that can lead a government to impose trade barriers, including: 1. Protection of domestic industries: Governments may use trade barriers to protect local industries from foreign competition, which can help create and maintain jobs in specific sectors. 2. National security: Some governments may restrict the import of certain goods or technologies to protect national security interests. 3. Retaliation: In some cases, governments may impose trade barriers in response to another country's unfair trade practices or to protect against dumping (selling goods in a foreign market at an artificially low price). 4. Revenue generation: Governments may use tariffs as a source of revenue, which can be used to fund public services.
04

Discuss considerations in government's decision-making

When deciding whether to impose trade barriers, governments must weigh the benefits of protecting domestic industries, national security interests, and generating revenue against the potential negative consequences for the average worker. Various factors may influence this decision, such as political pressures, economic circumstances, and a country's overall trade strategy.
05

Conclusion

In conclusion, although trade barriers may have negative consequences for the average worker in an economy, they can provide certain benefits for a country, such as protecting domestic industries and generating revenue. Governments must carefully consider the overall impact of trade barriers on their economy and population when making decisions about implementing such policies.

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