Trade Barriers From An Academic Standpoint

1655 WordsApr 26, 20157 Pages
Trade Barriers Allisa Bell ECN500- Global Economics Colorado State University – Global Campus Dr. Walter Vanpoolen April 23, 2015 Trade Barriers From an academic standpoint, economists overall believe that free trade would benefit the economy more than instituting tariffs and non-tariff trade barriers. However, the reality is quite different. Politically, tariffs help to strike a balance between social welfare and the politicians’ goals. One theory is that campaign contributions are needed for re-election; and to achieve these funds, politicians will weigh this need against welfare-reducing protection for industry lobbyists (Magee, 2011). The models would suggest that the tariffs should actually be much higher than they are due to the low efficiency cost of tariffs compared to the substantial gains provided for the producers (Magee, 2011). However, developed countries actually have very low tariffs. There are six possible explanations for why developed countries have such low tariffs when the political theories behind why we have tariffs at all would suggest they should be higher. Six Reasons for Low Tariffs There are six main reasons for the disparity realized between theory and reality. These explanations would suggest that politicians are just not responsive to the lobbying efforts, the welfare costs of the implemented tariffs are higher than anticipated, the General Agreement on Tariffs and Trade (GATT) successfully restrained trade barriers, free-rider

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