Question

Under what conditions do people advocate for TRADE RESTRICTIONS?

I believe the main reasons people advocate for TRADE RESTRICTIONS are due to the lack of understanding from the benefits of international trade. In my opinion, is most of the special interest groups are firms or unions that want to prevent any competition. This is to justify their position in the market, so they present arguments as to why there should be trade restrictions. Some might be due to political considerations due to quota or tariff that are directly affected. Just like how President Trump is bringing more manufactured companies back into the U.S. it is creating more needed jobs. The one thing we might have to watch for is the pay rate. For firms to make any money in what they are selling there needs to be a happy medium where the two can produce and make a profit. For example, it is cost-effective to hire and pay some individual cents an hour outside the U.S., then to pay someone ten dollars an hour for the same product here. Outside the U.S. the firms have fewer restrictions put on them towards the manufacturing plants.

***What is needed is a response to the above statement, just more insight or questions***

Answer 1

Trade Restrictions are practices that are aimed to shield local industries from the impact of foreign trade. Particularly implemented in the developing countries which seek protection from the advanced industries. In countries such as India, Bangladesh, China and others these are more prevalent because of the same reason.

These nations have higher trade restrictions in place so as to protect certain industries from the development which has taken place in developed nations in similar segments.

Consider a situation wherein this is not practiced and foreign companies are freely allowed to enter the market. Particularly in labor centric industries such as textiles and other similar manufacturing units. If people then are replaced by machines to increase production which is the common trend, it would lead to a situation in which many people would lose their jobs leading to lesser overall available funds and hence the demand would decline.

Therefore, trade restrictions are a key tool for governments seeking to protect specific industries from the impact of globalization since these at present are not as developed. Also, if prices charged by foreigners is relatively lower, no one would aim to buy these at all meaning loss of employment again.

Please feel free to ask your doubts in the comments section