Trade Restrictions: Arguments for and against:
Trade is generally the exchange of goods and services either in local or international markets for increasing the world output. The exchange of goods and services may sometimes not be free, that is trade restrictions may be imposed by certain governments to check on free trade between the host country and those involved in the trade (Taylor & Weerapana, 2007). Therefore, trade restrictions is said to be the placement of barriers, which are government, imposed for the purpose of controlling free trade (importing and exporting of goods and services). Despite the benefits that may accrue in through international trades, countries may prefer to put some limitations on trade especially if the country is the principal seller and or buyer of certain goods and services.
Trade restrictions or barriers are done through a number of ways ranging from tariffs on imported goods, quotas on imports, which check on specified levels of imports, embargoes, subsidies, restrictions on purchases, and product standardization among the long list.
Several reasons have been put forward as to why countries go ahead to impose trade barriers or restrictions (Taylor & Weerapana, 2007). Some of the crucial reasons are as follows.
Protecting of local labor/jobs market from the cheaper alien labor/employment
Importation of goods and services may affect the local trade and productions, which add up to, increased joblessness. The reverse of this may also be of substance since the existence of despicable labor in any country is associated with unskilled labor whose contribution is insignificant global competition and little growth to the domestic economy and industries. Cheap labor is sometimes common in the local markets. The implication for this is less to the demands in the international markets. The contribution of such unskilled labor is low growth and production in a country that imposes trade restrictions. Based on the line of national trade protection, the country lacks competitive advantage in the world market, since it only relies on the local unsophisticated technology, which lack improvement and innovation (Taylor & Weerapana, 2007). The local or home labor and businesses consequently lacks motivation to uplift and fit in the international market competition standards. Therefore, the trade barriers, which are focused on protecting the national jobs, may in turn offer competition disadvantages, lack of employment and retardation of the national industries.
The aspiration for domestic unemployment reduction; restrictions on trade at times salvage home or domestic employments when the global competitive firms are not pronounced. These are however short term indicative policies with later results of being non-effective in the national and international market framework (Wright & Wylie, 2009). Therefore, the low unemployment opportunity costs supersede unrestricted importation costs. To this effect, the country becomes demoralized in increasing production alongside competition, which plays a bigger part in the business loss even to other countries.
Desire to cancel out dumping in global trades
Dumping means selling goods and services at low prices in the international markets than in the local or home markets. Dumping practices should be discouraged in cases where international producers tend to weigh down competition and discouraging of innovative measures and the upgrading of domestic products (Wright & Wylie, 2009). Dumping can also be in the form rapacious dumping when the foreign producers tend to drive away the domestic producers of certain goods and services out of the market, and later hike the prices of same products. Such circumstances may call for trade restrictions even at times when the foreign products are at lower costs than the domestic ones and despite the point that local consumers are advantaged of acquiring the low priced goods and services. However, it also serves as a motivating factor for the domestic firms in upgrading and innovating their products for competitive purposes.
Protection of infant industries; through trade restrictions, the government is focused at protecting newly established firms so that they may grow to the level of withstanding global market competitions. This is because in the presence of such competitive foreign industries, young and undeveloped domestic industries may face challenges, which may hamper their potential growth into international competitive standards. Therefore, their protection through trade barriers may sound better to the young industries (Taylor, 2006). However, this may turn disadvantageous to the domestic consumer who may not enjoy the cheap products from the international producers (Taylor & Weerapana, 2007). This may not be justified if on other hand the firms/industries do not contribute positively to the domestic countries’ economic growth, creation of competitive employment and withstand global competition in due time. In addition to this, infant industries may turn to be non-cost effective to the government in turns of generating revenues and tariffs if the restrictions on imports are imposed on foreign industries (Justin, 2008).
Protection of the industries, which are important for national security
This may happen for political reasons if other countries are likely to strike back rising the opportunity cost of trade barriers. Some firms and industries produce goods and services that are vital to the country’s defense especially during times of war. The exclusion of some industries, which are of importance to the national security from free trade, may however put the country in the circle of being less competitive in the global markets, hence affecting also other related industries in the country. The impact will definitely be negative to the defense of the country. However, restrictions are of importance to such industries from international companies, which may tend to intimidate those for domestic security (Justin, 2008). Decrement of national balance of payment shortfall/loss; this is focused at salvaging sparse foreign currencies through regulation of imports.
Improving the countries’ trade and welfare stipulations:
The focus on this is to encourage home production and job opportunities in industries, which enjoy protection. However, partner countries in trade may tend to strike back and later affect the exporting industries.
Scientific Tariff
Focuses at balancing the prices of imported products to the locally made with a target of competing with the international competitor. This approach however seem to hold no water since real meaning of global trade is lost due to the removal of state differences in virtual prices of goods and services (Wright & Wylie, 2009). Protection of national health and safety standards: The justification of this is to prevent externalities and counteraction of information irregularity from imported goods and services (Healy, 2011).
Countries depended on each other for trade
Countries trade with others with a sole aim of getting goods and services not obtainable within their territories may be because of the unavailable resources locally or low technology of production. Under diplomatic grounds, trade is done by countries that corporate to boost their support on each other against other countries that may have opposing schema on them. Several countries in the world are depended on each other for trade.
South Africa and China
South Africa and other African countries’ economies depend on partnership with China for trade relations. China on the other hand depends on commodities supply from this/ these countries. This has promoted mutual growth between the two (Wright & Wylie, 2009).
China and Japan
China imports goods and services (technology) from Japan (Wright & Wylie, 2009). Venezuela and Cuba: Cuba is the chief market export for Venezuela products (Wright & Wylie, 2009).
Kenya and the European Union: The European Union is Kenya’s chief consumer of agricultural products while Kenya is the exporter of such products as motor vehicles and other high technological products (Blades, 2000).
References
Blades, H. (2000). Kenya. Oxford: Heinemann Publishers
Healy, J. (2011). Improving Health Care Safety and Quality. New York: Ashgate Publishing
Justin, P. (2008). Business Environment: test & cases 2E. New Delhi: Tata McGraw-Hill Education
Taylor, J.B & Weerapana, A. (2007). Microeconomics. New York: Cengage Learning.
Taylor, J.B (2006). Principles of Microeconomics. New York: Cengage Learning.
Wright, A. R. & Wylie, L. (2009). Our Place in the Sun: Canada and Cuba in the Castro Era. Toronto: University of Toronto press
