Effects of free trade (1 Viewer)

[z600]

Came across this question and not too sure on what the best answers are.

Describe two economic effects that the protection of domestic industries has on global trade. (2 marks)

I said

1) It reduces global trade to the trade barriers that exist between economies due to protection. This closes potential markets for other nations.

2) Global trade would reduce due to exporter gaining smaller returns (thats not really an effect but rather a reason)

soo not sure about this one

3) Globally traded goods that are protected by certain economies would likely to increase in price due to the imposed taxes.


Many thanks

 

[williamc]

1) It reduces global trade to the trade barriers that exist between economies due to protection. This closes potential markets for other nations.

2) Doesn't allow comparative advantage or specialisation of nations.

.

 

[onlinenooby]

Describe two economic effects that the protection of domestic industries has on global trade. (2 marks)


Higher level protection on domestic industries will promote inefficiency within these domestic industries, thus causing a reduced amount of global trade.


Higher protection on domestic industries limits entry into these markets, thus reducing amount of trading opportunities resulting in reduced global trade.

 

[haiderr]

Effects of protection on global trade:

1) increase prices of g + s --> decrease purchasing power parity --> decrease demand for g+s on global market --> decrease global trade.

2) causes a retaliation effect from other nations, thus further increasing protection in the global market and reducing global trade.

3) does not allow domestic industries the exposure to import competition --> decrease efficiency & diseconomies of scale --> those things mentioned in part 1).