If the removal of trade barriers is so beneficial to international economic growth, why would a nation continue to restrict trade on some imported or exported products?

Short Answer

Expert verified

Trade barriers are imposed to protect vulnerable markets from the competitive pressure of international trade, this hurts efficiency and domestic consumers but can be necessary to give time for domestic markets to stabilize.

Step by step solution

01

Concept Introduction

The barriers are restrictions that are imposed to limit international trade. These can range from tariffs, quotas, or even a total block of foreign goods.

02

Explanation of solution


Trade barriers can be very important for developing countries as their industries may not be as efficient to keep up with international prices, if exposed to the heavy competition it may be impossible for their domestic markets to survive. This is crucially important for food production, as every country needs to safeguard its food supply to maintain autonomy. Because of this agriculture is a common industry to have trade barriers in.

Despite all the benefits of trade barriers they do have several drawbacks, limiting competition can hinder efficiency and keep ineffective producers in the market. A major criticism comes from the food supply, as cheap agricultural products are widely available in the international market, so countries in food shortages will have the temptation to import a lot. However, if they do, it may hurt their domestic markets which will cause a food shortage in the future.

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(a) Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell?

(b) Calculate the opportunity cost of producing one additional television set in Germany and in Poland. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of televisions?

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(d) In this example, is the absolute advantage the same as comparative advantage, or not?

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