Restrictions on Free Trade – AS/A LEVELS/IB/IAL

Restrictions on Free Trade – AS/A LEVELS/IB/IAL

Courses Info

Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes

Free Trade is when countries are able to trade with each other without barriers or restrictions in place.

Reasons for Restrictions on Free Trade

  • Protect smaller industries – to protect smaller industries from getting demolished, until they grow and become internationally competitive
  • Balance of Trade – To correct any deficits or imbalances in the Balance of Trade (goods and services)
  • Monopoly Power – To limit the monopoly power that global companies may possess
  • Generate government revenue – Trade restrictions may also be helpful in generating the government revenue through import taxes
  • Protection against dumping – tarrifs placed on imports which are believed to have a price much below the fair market value
  • To prevent sectorial imbalance – restrictions on free trade prevent industries in country solely with comparative advantage from being developed; it makes it fairer for other countries


Quick Fire Questions

1. Define ‘Free Trade’ (2 marks)

2. Identify and explain six reasons for restrictions on free trade (12 marks)


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