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FREE TRADE AND RESTRICTION — Economics Keypoint

FREE TRADE AND RESTRICTION

Free trade entails the movement of goods and services without restriction. Note that there is no free trade because country’s imposes some restriction for one reason or the other.

SOME RESTRICTION MEASURES

Restriction of trade could be done through the following ways 

  1. import licenses (ii) import duties iii. Quotas ban and (v) exchange control

ADVANTAGES /REASONS FOR RESTRICTION OF INTERNATIONAL TRADE

  1. To protect infant industries.
  2. To improve balance of payments problem
  3. To raise revenue for government.
  4. To prevent the market of a country from being a dumping ground for imported goods
  5. To check the importation of dangerous goods like hard drugs.
  6. To encourage improved and effective utilization of resources produced locally.
  7. To boost self-reliance and sufficiency

DISADVANTAGES 

  1. Protected industries may form themselves into monopolies.
  2. It may lead to low standard of living because there is a shortage in supply of varied goods.
  3. Causes a rise in the prices of goods.
  4. Hampers specialization since the system of distribution and movement of goods are being disrupted.
  5. Mass production tends to o impossible because of the narrowness of the market as a result of the restriction.

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