Why does a country restrict her international trade?

Answer Details

A country restricts international trade by using barriers such as tariffs, import quotas, embargoes and exchange controls. It does so to protect and manage its domestic economy rather than allow completely free trade. The main reasons are:

1. To protect infant industries. New, young industries cannot yet compete with established foreign firms, so restrictions shield them until they grow strong.
2. To reduce unemployment. By limiting imports, demand is directed to home-produced goods, keeping domestic factories working and protecting local jobs.
3. To correct a balance of payments deficit. Cutting imports reduces the outflow of foreign exchange and helps to close a deficit.
4. To prevent dumping. Restrictions stop foreign firms from selling goods below cost to destroy local competitors.
5. To raise government revenue. Import and export duties (tariffs) are an important source of government income.
6. To improve national security and health. Governments restrict the import of dangerous, harmful or strategically sensitive goods (such as weapons or contaminated food).
7. To conserve foreign reserves and discourage the importation of luxury or non-essential goods.

Examination reminder: give the reason and a short justification for each; a bare list without explanation earns fewer marks.