The main arguments against trade restrictions are that they decrease the efficiency of the economies involved and may lead to trade wars. Trade restrictions include tariffs on imports from or bans on trade with certain countries.Continue Reading
Trade wars occur when a country imposes trade restrictions in response to trade restrictions imposed by another country. This process often leads to escalation, which may have serious economic consequences for one or both of the countries involved. For example, if one country has the capacity to produce more rice than it can consume, it is beneficial to export that rice, but if its main market for rice exports imposes trade restrictions, the result may be overproduction. This overproduction drives prices for rice down, further exacerbating the economic consequences.
Trade restrictions often have a negative impact on countries with a relatively poor, developing economy. This is because they don't have the economic strength to combat trade restrictions or absorb the losses they cause, which may be possible for a wealthy country.
When countries remove trade restrictions, all the economies involved function better because certain countries can produce certain materials, goods and services cheaper than others. For example, a country may have an abundance of minerals but no capacity to turn those minerals into goods. If trade is free, however, that country may enter into a mutually beneficial export agreement with a country that has the necessary processing and manufacturing facilities.Learn more about Business Resources