Evaluate the implications of a reduction in barriers to the trade in goods and services for the globaleconomy

Question

Evaluate the implications of a reduction in barriers to the trade in goods and services for the globaleconomy

Answer 1

Trade barriers are protectionists economic policies. This means that they protect the domestic firms from global competition. Without competition and government protection, the domestic firms have less incentive to innovate. With the firm's artificial prices (of either their costs or their products being sold), they do not run efficiently (not allotting resources most efficiently).

Without these protectionist policies, the domestic firms are worse off i.e. no longer protected by global competition. However, with trade barriers down, the domestic consumers benefit with reduced costs and more innovated products. Overall, the benefits of international trade outweighs the costs.