Question

If the removal of trade barriers is so beneficial to international economic growth, why would a nation continue to restrict trade on some imported or exported products?

Short answer

Trade restrictions are imposed to protect domestic markets & producers, consumers, for economy's forex & BOP management.

Step-by-step solution

Trade Barriers Meaning

Trade barriers are government induced restrictions on international trade, ie export & import.

These can be:

• Tax barriers - like import tariffs & customs duty
• Non tax barriers - like quotas and other qualitative restrictions.

Trade Barriers - Concept & Merits, Demerits

Removal of trade barriers is advocated on the grounds of

• Specialisation, Economies of Scale, Enhanced global choice & efficiency, lower price, global economic gain.

However, many economies still retain trade barriers because

• Underdeveloped and developing economies' goods are not able to compete with developed economies' goods.
• Developing countries' small infant industries need considerable protection from global giants to flourish.
• There is risk of dumping at lower prices, which hampers domestic emerging markets.
• Demonstration effect & reliance on foreign goods, despite of less income & savings is detrimental to growth.
• Foreign exchange & Balance of Payment management also sometimes require trade restrictions.