Explain five disadvantages that a country would suffer if she restricted trade with other countries.

Explain five disadvantages that a country would suffer if she restricted trade with other countries.

Disadvantages that a country would suffer if she restricted trade with other countries include:

1. Development of monopolies - Monopolies may emerge due to lack of competition from possible rivals exposing consumers to exploitation.
2. Reduced consumer choice - trade restrictions reduces the variety of goods and services available to consumers leading to lower standards of living.
3. Trading conflicts - trading partners are likely to retaliate, leading to conflicts between the countries involved.
4. Poor quality goods - protected domestic industries may produce poor quality goods and services due to lack of competition from established industries.
5. Lack of growth of infant industries - overprotected infant industries may not grow from infancy always seeking for continued protection.
6. Reduced production capacity - this results from the reduced market as a result of the trade restrictions hence under-exploitation of available resources.
7.  Misallocation of resources - it may force a country to use her resources in areas where she has no comparative advantage.
8. Costly to the government - this may happen if measures like subsidies are used to enhance restrictions by encouraging import substitution.
9. Encourages smuggling which leads to entry of counterfeit goods and loss of government revenue.

​​Related Business Studies Quiz and Answers on International Trade Form 4 Level

Read More