You have probably heard the concept that globalization is good because it allows the global market to be opened up, thus allowing the entry of a lot of goods and services into a country. This enables the customers to have a wide range of choices and they will also be able enjoy a lower price for the same product because of the threat of competitions.
While globalization does have its benefits, you should also be aware that it does have its downsides as well. There are many reasons why businessmen want to restrict trade and some of their reasons are quite valid.
One reason why it is sometimes recommended to restrict trade is because of employment. Why is this? You might wonder. The nature of globalization in itself puts a threat to some domestic jobs if the industry is opened up. If the same kind of product enters a country at a lesser cost, then you should expect that the customers will buy this product instead of the local product.
In some cases, the local industry may not be able to compete because the goods from a foreign country might have a lower cost of production because of cheaper labor or cheaper electricity. Without government restrictions, these domestic industries sometimes have no choice but to stop operations. This sometimes leads to massive lost of jobs.
Another reason why trade should be restricted is related to the example above but now it has something to do with national security. For example, if another country does provide cheaper products then the industries in the domestic country will close. Now imagine if the industries that close are related to the steel and mining industry.
If a war does occur, that particular country will be vulnerable because they do not have the capacity to produce steel on their own to make tanks and other weapons. This is the reason why governments restrict trade in sensitive industries.
Another reason why trade is restricted is because some industries in particular countries are still at its early stages. These countries do not have the capacity to compete with foreign competitors.
If the government of these countries wants to develop these industries, they will have to restrict trade so that the domestic business has the opportunity to grow and reach the economies of scale before they confront the world industry leaders.
As you can see, trade restrictions should not be looked at negatively because they do help in making businesses more competitive. In addition, these trade restrictions should be considered by domestic businesses as protection against foreign competitors until such a time when they have grown enough to compete.
It is also important to remember that these restrictions should not be used permanently, because it limits the choices of the customers and their satisfaction is very important to the success of the business.
Godfrey Thaxter is a Marketing Consultant who provides
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