ECO 202 WK 4: Governments Restricts International Trade, Benefits and Loses

Eco 202
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ECO 202
1 How governments restricts international trade and who benefits and loses from the same.
Governments restrict international trade mainly by use of tariffs, subsidies and quotas. There are two types of tariffs: revenue tariffs which are put in place to raise revenue for the government and protective tariffs which are put in place to specifically make foreign goods more expensive than domestic goods. The general effect of a tariff is to increase the price of an imported product which in turn favors locally produced products which are similar in nature due to reduced competition. Subsidies are grants by the government to domestic producers to encourage exports. The grants are used to pay production costs which in turn lead to less being charged for goods than foreign producers. Quotas are limits on amounts that can be imported. The effect of a quota is that it creates shortage in supply of a good hence forcing its price to go up and consequently allowing domestic producers expand their production (Roorbach, 2010).
Trade restrictions benefit domestic producers since consumers demand more domestic products owing to the increase in price of foreign goods. The producers are therefore able to create employment so as to satisfy the increasing demand (Roorbach, 2010). They also benefit the government by increasing the national revenue as a result of levying tariffs on imported goods it also leads to enhanced national security especially with regard to domestic production of defense equipment. Consumers are protected through import regulations set to ensure consumer goods are safe for domestic consumption.
Levies on raw materials will lead to increased production costs on the importing country therefore reduced global economic growth where developed nations grow while developing countries struggle where developed countries have adopted trade policies hence reducing export opportunities for developing countries (Tran-Nam, Long & Tawada, 2008).
2 Why low wages rates in Africa do not attract major corporations to move to Africa.
Irrespective of the low wage rates in Africa, the value brought forth by the laborer may not represent the efficiency and effectiveness required by the corporations. Low wage rates are characterized by poor working conditions, laborers are not provided with health care coverage, few leave days and minimal opportunities for training advancement. For major corporations to move to Africa, the cost of training would be really high, since the technology used by such corporations would be technical for such laborers to comprehend. There would therefore be net losses as a result of such a move (Knight, 2010).
It would take time for laborers to be trained such that they attain specialization in their respective fields. Such laborers are not educationally qualified to understand complex concepts which may render their usefulness for the corporation’s goal optimization inefficient.
3) Would the dollar appreciate or depreciate if;
* Interest rate in Japan is lowered
There would...