Question

Although the free-trade argument tends to dominate in the classroom, virtually all nations have imposed restrictions on the international flow of goods, services and capital. The proponents of protectionism say that free trade is fine in theory, but that it does not apply in the real world because modern trade theory assumes perfectly competitive markets whose characteristics do not reflect real-world market conditions. Over the years, a number of arguments have been advanced to pressure the governments to enact restrictive anti trade measures.
REQUIRED:
Outline some four (4) arguments given by protectionist proponents as some of the reasons for justifying the imposition of trade barriers, like tariffs.

Answer 1

5) Though free international trade maximise trade world utput and welfare, practically, most countries have been resorting to sme sort of restrictions upon the free flow of goods and services. International trade is generally characterised by the existence of various trade barriers. trade barriers refer to the government policies and measures which obstruct the free flow of goods and services across national borders. The main objectives of imposing trade barriers are :

• To protect domestic industries or certain sectors of the economy from foreign competition.
• To guard against dumping.
• To conserve the foreign exchange resources of the country.
• To make the balance of payments position more favourable.
• T curb conspicuous consumption and mobilise revenue for the government.
• To promote indigenous research and development

Trade barriers may be broadly divided into two, namely;

1. Tariff barriers
2. Non-tariff barriers

Tariff Barriers :

Tariff refer to the duties or taxes imposed on the internationally trade products when they cross the national borders. It is synonymous with import duties. It is a very important instrument of trade protection. The imposition of tariff an economy in different ways, namely ;

1. The import duty generally has a 'protective effect ' because of the increase in the price of the imported goods.
2. 'consumption effect' because of the fall in consumption due to the increase in prices.
3. 'Redistribution effect' - that is , redistribution of income between the consumers and producers in favour of the producers because of the increase in the price of domestically produced goods faciliated by the import duty.
4. 'Revenue effect' - that is , revenue for the government .
5. 'Income and employment effect' arising from the protection of domestic industries.
6. 'Anti-competitive effect' of the protection of domestic industries.
7. 'Terms of trade effect' arising from the improvement pof the terms of trade of the country imposing the tariff.
8. 'Balance of payments effect' brought in by reducing the volume of imports.   

Non-Tariff Barriers :

While tariffs are regarded as the traditional barriers, non-tariff barriers are described as 'new protectionism measures'. The non-tariff barriers have grown considerably, since the begning of 1980s. Over the years , have been becoming more extensive and intensive. Several advanced countries like united states, which were the ardent supporters of free trade increasingly resort to several non-tariff barriers, practically against the developing countries.