Arguments for a country wishing to restrict free trade, Business Management

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Briefly explain the main arguments for a country wishing to restrict free trade.

Protection

There may be a require to protect fledgling industries which would not be able to compete on an equal footing with foreign competitors. These industries typically have yet to achieve economies of scale in production and possibly do not yet enjoy the factors of production that foreign competitors do. (e.g. a well trained labour force , simple of finance etc.)

Prevent 'dumping'

Protection may help avoid a 'dumping' of excess goods at unrealistically low prices by foreign companies which would impact unfairly on home producers.

Overcoming spoiling tactics of foreign competitors

Protection may help stop 'loss leader' pricing of goods by foreign competitors in order to unfairly damage local suppliers and gain market share.

Protect national cultural identity

A government may feel the requirements to protect its national cultural individuality against what it views as undesirable values and influences. As a result it may restrict free trade. (For instance, certain multinational operations might be discouraged if it is feared that there would be suppression by (say) undue American values being imposed on a proud indigenous culture founded on local, historical and religious heritages).

Ethical or moral grounds

A government might be feel a need to safeguard home consumers against harmful or distasteful imports (e.g. objects made of ivory, rare bird egg collections, 'date rape' drugs etc.)  

 


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