Problem 3

Introduction

Government-imposed limitations on international commerce are known as trade barriers. Economists pretty much agree that barriers to trade are inefficient and reduce total economic effectiveness; the principle of competitive advantage explains this. Most trade restrictions function on the same principle: levying a price on trade (funds, effort, bureaucracy, quotas) that boosts the price or accessibility of the exchanged goods. A trade war occurs when two or more countries deploy barriers to trade against one other on a regular basis.