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Import Controls and International Trade

  • Date Submitted: 02/27/2011 06:33 PM
  • Flesch-Kincaid Score: 41.5 
  • Words: 623
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Trading within the economy is an essential part in ensuring the growth of the economy and firms’ profit. International trade has been going on for years; however, over the recent years in particular, there has been a vast expansion on import controls, this is due to various reasons, these reasons are to help growing firms with their domestic status.
Certain industries possess a potential comparative advantage but have not yet exploited the potential economies of scale.   Thus, short term protection from established foreign competition allows the infant industry to develop its comparative advantage.   At this point the protection could be relaxed, leaving the industry to trade freely on the international market. The danger of this form of protection is that the industry, free of the disciplines of foreign competition, will never achieve full efficiency.
Additionally, with the increased import controls, there will be a reduction/protection from dumping which refers to the sale of a good below its cost of production. In the short term, consumers benefit from the low prices of the foreign goods, but in the longer term, persistent undercutting of domestic prices will force the domestic industry out of business and allow the foreign firm to establish itself as a monopoly.   Once this is achieved the foreign owned monopoly is free to increase its prices and exploit the consumer.   Therefore protection, via tariffs on 'dumped' goods can be justified to prevent the long term exploitation of the consumer.
Furthermore, it can improve balance of payments. Trade barriers might be viewed as one vehicle to control the growth of demand for imports and therefore improve the overall balance of trade in goods and services. The main problem with this is that import controls do not address fundamental issues of a lack of international competitiveness - and that trade barriers simply as a device for controlling a trade deficit do not wash with the World Trade Organisation.


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