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Why do countries trade? Explain the advantages of specialisation and free trade. Why do governments use protection?
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| Submitted: Mon Jul 19 2004
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Practice Essay Question: Why do countries trade? Explain the advantages of specialisation and free trade. Why do governments use protection? International trade has the purpose of sufficing demand for goods and services not readily available within a country. Specialisation and free trade can bring about a situation where countries may take advantage of the concepts of absolute and comparative advantages. However, in the face of globalisation, countries still practice methods of protection (such as tariffs, quotas, subsides, local content rules or voluntary export restraints), using the main justifications including: the infant industry argument, protecting domestic employment, the anti-dumping argument, the defence and self-sufficiency argument and the cheap foreign labour and environmental exploitation argument. International trade refers to the trading between the nations of the global economy. This enables a country to satisfy the demand for goods and services not being readily available in the economy (lack of supply) or another nation produces...
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