Reasons for Trade Restrictions (Cambridge (CIE) IGCSE Economics): Revision Note

New industries may need protection from foreign competition until they become efficient and competitive.

• Example: A developing country supporting its growing solar panel sector

Old industries that are shrinking may be protected to slow down job losses and help manage transition.

• Example: Coal mining in some countries

Essential sectors (like food, energy and defence) are protected to maintain national security

• Example: Limiting foreign control of telecoms or arms production

Dumping is when foreign producers sell goods below cost to gain market share

Restrictions help protect domestic firms from unfair competition

Reducing imports can help improve the balance of payments by reducing the money flowing out of the country

Tariffs on imports generate revenue for governments, which is especially useful in countries with weak tax systems

Importing goods like alcohol or tobacco may be restricted to reduce harm to public health

Restrictions can be placed on goods that damage the environment or are produced in harmful ways

• Example: Limiting imports from deforestation-linked supply chains

Protects local jobs and industries

Encourages domestic production

Increases government revenue through tariffs

Can improve trade balance (fewer imports)

Consumers face higher prices and less variety as trade restrictions increase import costs

Domestic firms may become less efficient without competition

Can provoke retaliation from other countries

Slower innovation and limited access to better technology