Free Trade and Government - Essay Example

The disadvantage of free trade for developing nations is that they cannot compete with the organizations of the developed world since they have access to better technological tools that allow them to produce goods and services in a much more cost-effective manner. Free trade discourages a nation to attain self-sufficiency since the nation only produces those goods and services that they can produce in a much more effective and efficient manner as compared to producers of other nations. Free trade is only healthy when both the importing and exporting countries have not levied trade restrictions.

2. Government may restrict free trade with the use of tariffs which refers to the imposition of taxes on the number of goods that can be imported. Government can restrict imports by imposing quotas which are restrictions on the quantity of a particular good or service that can be imported. They may provide subsidies such as tax benefits to exporters. The government may adopt these policies for several economic and political reasons. They may do so in order to motivate industries to develop and produce locally and this in turn will benefit the local economy (Jones, 2001). They may impose these restrictions to provide support to industries that have just been set up within a nation. They may do so in order to correct the issue of balance of payment which may be created due to excess of imports over exports. Read More