Question

Why is tax on imports known as a trade barrier ​

Answer 1

Explanation:

Trade barrier means restrictions imposed on import and export of goods. It is called so because some restrictions have been set up. The trade barriers provide protection to domestic goods from foreign competition. The government can use barriers to increase or decrease regulate foreign trade and to decide what kind of goods and services and how much of each should come into the country.Reasons for putting barriers to foreign trade and foreign investment by the Indian Government were: i To protect the domestic producers within the country from foreign competition.ii The competition from importers would have crippled the new-born industries of India. In such a situation imports of only such commodities were allowed which were quite necessary such as machinery fertilisers petroleum etc. iii During 1950s and 1960s competition from imports was giving a death blow to growing industries in India. Hence India allowed imports of only essential goods.