Economics
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Exercise 1
| efficient | subsidised | recession | unemployment | self-sufficiency
| law of comparative advantage | low wages | sunrise | allocation of resources
| international competition
Given the potential advantages of free trade many countries including Australia protect their domestic industries from ______________ by imposing artificial barriers on imported goods and services.
A popular argument is for the protection of ______________ or infant industries until they become internationally competitive. However it is a very difficult task to target the right industries and some may require protection for a number of years.
The protection of employment in the domestic economy is another argument used by governments in times of ______________ and high unemployment. Some countries have large labour forces that are paid ______________ and can export goods at very competitive prices. Inefficient industries in importing countries may be forced to close creating ______________. This argument fails to take into consideration the ______________.
Dumping often occurs when producers have had their production costs ______________. This allows goods and services to be sold on the world market at prices well below cost.
For example, wheat farmers in the USA and EU benefit from non-tariff (NTBs) barriers such as subsidies; depressing world commodity prices and reducing incomes to Australian farmers.
Governments may also put forward a politically motivated case for protection based on ______________. According to this argument the production of goods such as military equipment is of strategic importance and should be domestically produced rather than imported.
Restricting free trade distorts the ______________ from the more efficient to less efficient industries. Employment levels will be maintained in the protected industries at the expense of the more ______________ areas of the economy.
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