Why do economists oppose policies that restrict trade among

Why do economists oppose policies that restrict trade among nations? 6.

Solution

Trade is necessary for success of an economy. Countries which develop trade relations with others have better production opportunities & have diverse range of products for consumers. Trade restrictions stop the entry of foreign products in local markets. This results in overpricing of product due to less supply & inefficient use of local resources. Allowing entry of goods from foreign markets results in competitive trade which benefits both consumers & producers as consumers gain from low prices & producers have increased profit rates.

The idea of comparative advantage applies to countries as well. A country will export goods for which it has low opportunity costs & import goods for which it has high opportunity costs. This can be achieved through unrestricted trade polices only. Trade brings competitive advantage in terms of cost, technology & production capacity. Trade restrictions can result in low quality goods & services as it restricts technology transfer. Trade increases the output in economy by using resources efficiently. Therefore economists oppose policies that restrict trade among nations because trade results in greater prosperity of a nation by gaining from competitive advantage.