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

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)

Next Revision Topics

• Types of Restrictions on Free Trade
• Patterns of Trade
• Terms of Trade
• World Trade Organisation
• Specialisation and Trade
• Globalisation
• Imports / Exports
• Balance of Payments
• Exchange Rates
• International Competitiveness
• Trading Blocs

A Level Economics Past Papers

• AQA
• Edexcel
• OCR
• WJEC