Specialisation, free trade and trade restrictions

Learning objectives

Define specialisation by country and explain its basis: a country concentrates on the products that its resources suit best or that it can make at low cost

Discuss the advantages and disadvantages of specialisation by country

Define free trade and discuss its advantages and disadvantages for consumers, firms and the economy

Describe the types of trade restriction — tariffs, import quotas, subsidies and embargoes — and analyse how a tariff affects price, imports and domestic producers

Explain the reasons for restricting trade: protecting infant, declining and strategic industries, avoiding dumping, reducing a current account deficit, raising tax revenue, limiting imports of demerit goods and protecting the environment

Analyse how trade restrictions affect the country that imposes them and the countries it trades with, and discuss the case for and against restricting free trade