why are trade barriers imposed on the foreign trade and investment in a country?Explain with the help of two illustrations.plzz answer fast!!!!!!!
Answers
ANS :- Trade barriers refer to certain restrictions which are imposed by the government for the free exchange or trading of goods and services with the foreign countries.
Reasons for the Indian government to impose trade barriers include:
1.To safeguard the domestic producers from foreign competition.It was clear that the domestic producers have to face a tough competition with the entry of foreign goods.
2.There was a fear that the economically strong countries would try to establish economic colonialism India through free trade.
3.Free trade economy would be a threat to society and culture as an entry of foreign goods and items would make people more westernized in outlook and appearance.
4.The Indian government wanted to establish a different standard of the economy which would be socialistic and look for welfare, not a capitalist economy looking for profit and business.
Example:
1. Indian govt. has put a tax on import of Chinese toys.
2. There have been imposed excise duties,custom duties,tax,etc. on other commodities,too.
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Answer:
Reasons Governments Are For Trade BarriersTo protect domestic jobs from “cheap” labor abroad
Wages in industrialized countries are higher because their output per worker is higher than the output per worker in developing countries. The higher wages reflect higher productivity. Otherwise, there is no comparative advantage in producing that product, or the owners would have to reduce wages to match productivity.
For example, the U.S. has import tariffs on sugar, making imported sugar more expensive than domestically-grown sugar. Thus, people in the US are going to buy US-produced sugar, which keeps money in the wallets of US sugar producers and farmers.
2. To improve a trade deficit
Trade barriers make imports more expensive, and as a result, they also decrease the demand for imports. However, in retaliation trade partners can do the same and increase prices for exports.
Thus, this using this rationale, governments won’t necessarily fix the problem, if domestically produced goods aren’t competitive or are not high-quality. Countries will also spend less on imports if their exports go down.
3. To protect “infant industries”
Countries want to give newly developing industries (known as infant industries) time to grow and become competitive. This is a reasonable argument for imposing trade barriers.
However, in some cases, government protection never ends. These industries become competitive only because the government has given the benefit of the trade barrier.
4. Protection from “dumping”
Dumping is when an importer sells products at a below-average cost of production.
Dumping is hard to prove, yet nonetheless, sometimes countries impose anti-dumping duties just because it is competing against a locally manufactured product.
5. To earn more revenue
Governments gain extra revenue from tariffs (which is a tax on imports). The tariff may be in the form of a specific or ad valorem tax. Tariffs ra