An Argument on Restriction of Trade Should India be Easing Trade Restriction by force from the developed nations?

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An Argument on Restriction of Trade –

Should India be Easing Trade Restriction by force from the developed nations?

PGCBM -20

Name of the faculty: Mr. Vishwas Vallabh

Subject: Managerial Economics

Submitted by:

Arvind Mohan

An Argument on Restriction of Trade –

Should India be Easing Trade Restriction by force from the developed nations?

Introduction

Recently, the United States attacked India's trade policy criticizing its barriers to agricultural imports and retail sector investment and warned that India may not have shaken off the red tape and trade restrictions that have long plagued foreign business.        

Trade barriers by other Countries

In the wake of the strong hypothetical case that has evolved for free international trade, almost all the country in the world has put up at least some barriers to trade. Trade restrictions are typically embarked on in an effort to protect companies and workers in the home economy from competition by foreign firms. A protectionist policy is one in which a country restricts the importation of goods and services produced in foreign countries.

 The meltdown in the U.S. economy in 2007 and in 2008 had shaped a new round of protectionist sentiment The United States, for example, used protectionist policies to limit the quantity of some foreign-produced goods coming into the United States. The effect of this policy was to reduce the supply of the good in the U.S. market and increase the price of the good.

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The Impact of Protectionist Policies

Protectionist policies reduce the quantities of foreign good and services supplied to the country that imposes the restriction. As a result, such policies shift the supply curve to the left for the good or service whose imports are restricted. In the above figure, the supply curve shifts to S2, the equilibrium price rises to P2, and the equilibrium quantity falls to Q2. In general, this policy imposed for a particular good always reduce its supply, raise its price, and reduce the equilibrium quantity, Protection often takes the form of an import tax or a limit ...

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