Economics Tuition – Explain the factors that limit free trade.
The factors that limit free trade can be seen in terms of the artificial barriers to trade, and natural barriers to entry.
The artificial barriers to trade refers to protectionism, in which countries implement policies that prevent the import of foreign goods into the country. For example, a country can impose import tariffs to lower the profitability of imports, thus discouraging foreign firms or countries to sell their goods to the country. Consequently, the imposition of protectionism contributes to the presence of trade barriers that will hinder the ease of free trade.
Also, natural barriers to entry will limit free trade. One such natural barriers to entry is the high transportation cost, which will raise the cost of production, such that the price of imported goods and services is relatively higher than the price of domestically-produced goods. Consequently, there will be an increase in consumption of domestic goods and the fall in demand for imported goods, implying that such a natural barriers to entry would hinder free trade.
This article is contributed by Mr. Simon Ng, founder and principal JC Economics Tutor of Economicsfocus, who has 20 years of teaching experience. Currently, Mr. Simon Ng provides specialized Economics Tuition and GP Tuition. To read more articles on Economics issues and skills development, please refer to the JC Economics Essays blog.