Dimensions of Trade policy

Dimensions of Trade policy

The trade policy of a country has two dimensions namely free trade policy and protection. Free trade policy means there are no restrictions on imports and exports especially imports. The goods and services can move freely between different countries as they move between different parts of a country. The government may impose some taxed on imports and exports especially imports but the intention behind imposing these taxed is not to restrict the inflow of goods in to the country but to earn some revenue from foreign trade. These duties are nominal duties. The quantitative restrictions are almost absent under the policy of free trade.

Under policy of protection the government takes steps to restrict imports with the intention of reserving the domestic market for domestic industries. The imports are restricted with the help of tariffs that is heavy import duties or with the help of non tariff barriers. The tariffs are import duties imposed at very high rates. The prices of the imported goods rise to such a level that the people do not purchase them. The people purchase the domestic goods which are substitutes for the imported goods. The domestic industries get a protected market.

If the tariffs are not effective the non tariff barriers are quantitative restrictions are used for preventing foreign goods from entering in to the domestic market. The imports of some commodities are totally banned. The imports of some other commodities are allowed upto a particular level. The other part of the market remains open for the domestic industry. It can use that market and grow. The forms of non tariff barriers are

a)    Quota

b)    Health Restrictions

c)    Social restrictions

d)    Import licensing

e)    Exchange control

f)     Carrier requirements

g)    Voluntary restraint