Free trade is a policy in international markets in which governments do not restrict imports or exports. Free trade is exemplified by the European Union / European Economic Area and the North American Free Trade Agreement, which have established open markets. Most nations are today members of the World Trade Organization (WTO)multilateral trade agreements.A trade restriction is an artificial restriction on the trade of goods and/or services between two countries. It is the byproduct of protectionism
Free trade policies generally promote the following features:
- Trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on imports or subsidies for producers)
- Trade in services without taxes or other trade barriers
- The absence of "trade-distorting" policies (such as taxes, subsidies, regulations, or laws) that give some firms, households, or factors of production an advantage over others
- Unregulated access to markets
- Unregulated access to market information
- Inability of firms to distort markets through government-imposed monopoly or oligopoly power
- Trade agreements which encourage free trade.
- 5.1 Introduction
- 5.2 Production Possibility Curves
- 5.3 Trade Efficiency Rule
- 5.4 Terms of Trade
- 5.5 Tariffs and Quotas
- 5.6 Trade Restrictions
- 5.7 International Finance
- 5.8 Purchasing Power Parity and Interest Rate Parity
- 5.9 Foreign Exchange
- 5.10 Spread Calculations
- 5.11 Spot Market Calculations
- 5.12 Forward Market Calculations
- 5.13 Interest Applications
- 5.14 Foreign Exchange Parity Relations
- 5.15 Currency Appreciation and Depreciation
- 5.16 Effect of Monetary Policy
- 5.17 Fixed vs. Pegged Exchange Rate Systems
- 5.18 Absolute and Relative Purchasing Power Parity
- 5.19 Relative Purchasing Power Parity
- National Defense - Foreign producers should not be relied upon for production of defense goods, even if the goods can be produced at a lower cost abroad.
Global Economic Analysis - Trade Restrictions
Advantages and Disadvantages
Trade barriers reduce the possible quantity of goods that can be consumed and produced within an economy. Prices will be higher, and there will be fewer choices with regards to consumer goods.
Beneficiaries of a tariff include the government, which collects the tariff, and domestic producers within the affected industry (or industries). The general public (consumers) loses.
Arguments in favor of trade restrictions include:
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