This concludes Module 10. By now, you have a very strong concept of markets and how the governments’ tinkering with prices can affect consumers and producers. In this module, I introduced the implications of trade to show how we as a society can benefit by specializing and exchanging the produces of our labour such that we can consume a greater variety of products and services at lower costs. The result of trade is greater efficiency and positive net benefits.
The model assumes we are engaging in free trade, which is an ideal that we don’t or can’t always achieve. Trade policy is used to “level the playing field” to make trade more equitable. It can be used to protect consumers from dangerous goods, or dissuade foreign companies from using unfair labour practices or production methods that lead to environmental damage.
Trade policy can also be fraught with protectionist strategies to prevent imports from competing with domestic suppliers. Where a group of producers has much to lose, they have strong incentives to lobby governments to implement protectionist policies. At the same time, governments have strong incentives to listen.
This module builds on all the former modules beginning with the seven key economic principles, economic concepts such as efficiency, and implicitly, sustainability as we use resources more efficiently through trade. Consider the economic implications increasing or decreasing imports.