The paper "Reasons Why Governments Place Restrictions to Free Trade" is a great example of a business essay. International trade is important and beneficial for numerous reasons. For instance, free trade based on comparative advantage enhances a country’ s wellbeing. Despite the several benefits of international trade, nations have imposed restrictions such as tariffs, non-tariff barriers, and import quotas. Proponents of government intervention in international trade argue that international trade hinders infant industries from achieving their full potential. Other valid arguments by proponents of international trade restrictions include; protection of jobs, cultural considerations, political reasons among others. Even though the world, since World War Two, has witnessed great reductions in trade barriers, nations everywhere continue to restrict free trade.
This essay discusses the political, economic, and cultural motives behind government intervention in trade. Introduction Trade restrictions are barriers placed by governments to protect domestic firms or industries from foreign competition by using either tariffs or non-tariff barriers. A tariff is a tax imposed on imports by the importing country as the goods cross its international boundary (Hindley, 1994). Since World War II, there has been a series of “ rounds” of negotiations to reduce barriers to international trade.
These multilateral negotiations played a crucial role in lowering trade barriers. In 1947, the General Agreement on Tariff and Trade (GATT) was formed to regulate international trade and to enhance reduction to trade restrictions among member states (Hindley, 1994). Subsequent rounds of GATT took place in the 1960s, 1,970s, and 1980s, leading to a significant decline in trade restrictions among the member states. This agreement was replaced in 1995 by the World Trade Organization (WTO) following the Uruguay Round that took place in 1994 (World Trade Organization, 1998).
Other trade agreements that were established with a view of enhancing trade among member states include the NAFTA, European Union, and the Asia-Pacific Economic group. The American Free Trade Agreement (NAFTA) was meant to lower trade restrictions between the United States, Mexico, and Canada. The European Union was established by European nations to eliminate trade restrictions among them. The Asia-Pacific Economic group (APEC) was formed to reduce trade restrictions among East Asian nations.
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