Why nations impose trade restrictions
The argument for international trade is overwhelming. No country however rich or large makes everything it needs or has all the resources for its manufacturing industries.
Small countries benefit from foreign trade even more than larger countries. The United States is composed of 50 States. They conduct a good deal of business between themselves since they are in different climatic zones, with the southern States within the tropics and the northern ones in the temperate zone.
International trade enables countries to have access to products which they are unable to produce or make. Many small countries of the world have become fabulously wealthy from their oil oases. They exchange their oil for the motor cars and aeroplanes which are manufactured by countries like the United States, Japan and Germany which have little or no oil oasis of their own.
Despite the obvious advantages of international trade (trade between nations) we find every country has enacted legislation which seeks to curb imports. The restrictions are made through tariffs, quotas, non-tariff barriers or open prohibitions. A variety of reasons are given for these restrictions, the most common of which are presented here.
1. Job protection. Free trade may enable citizens of the countries involved to obtain each other’s cheaper exports. But either of them may discover that its industries fair badly in the competition, and are forced to close some of their factories because they are not able to sell all that they produce.
During the time of recession or poor trading conditions, unemployment gets worse if imports are let in to the extent that they destroy local industries. It is during such situations that firms that fair badly under free trade lobby their government to impose restrictions on imports.
The request is not easy to grant because most customers benefit from buying cheaper imports than buying local products at higher prices and sometimes of inferior quality.
Sometimes the imports are used as raw materials or components by some domestic manufacturers who welcome them in order to reduce their own costs of production. Reduced costs of production result in manufacturing products which are competitive in foreign markets.
Open trade of course creates jobs as well. When a firm produces for a local market only it has a limited capacity for generating employment than when it produces for exports as well. In times of recession, however, unemployment caused by imports seems more visible than employment generated by exports.
2. Protection against cheap labour. To the argument for free trade these lobbying for protection answer with the slogan “fair trade.” They say free trade takes place only when there is a level ground.
When foreigners pay their factory workers starvation wages and we pay higher wages, products from foreign factories are bound to be much cheaper and will undercut ours when they arrive here.
Arguments against cheap labour have been advanced by industries is developed countries such as the United States and Europe where trade unions have successfully fought for higher compensations. They are against manufacturers from newly industrialised countries like those in the Far East.
Those who against child labour do not do so altruistically they see child labour as cheap labour which enables foreigners to dump their exports abroad. It is forgotten that when Britain was going through the industrial revolution child labour was the norm while the Untied States produced highly competitive products using slaves from Africa.
