Answer:
1. TARIFFS: Tariffs are import taxes imposed by governments on goods and services entering a country. They act as a barrier to free trade by making imported products more expensive compared to domestically produced goods. Tariffs are often used to protect domestic industries from foreign competition, as they make imported goods less competitive in terms of pricing. By increasing the cost of imported goods, tariffs discourage consumers from purchasing them and encourage them to buy domestically produced alternatives. This policy restricts the free flow of goods and services by favoring domestic industries at the expense of foreign competitors.
2. Quotas: Quotas are limits set by governments on the quantity or value of certain goods and services that can be imported into a country during a specified period. These restrictions prevent the free trade of goods and services by limiting the volume of imports. Quotas are typically implemented to protect domestic industries from foreign competition or to manage the balance of trade. By restricting the quantity of imported goods, quotas artificially inflate the price of imported products and create an advantage for domestic producers. This interferes with the principles of free trade by restricting consumer choice and market access for foreign producers.
3. Subsidies: Subsidies are financial assistance provided by governments to domestic industries, typically in the form of grants, tax breaks, or low-interest loans. While subsidies are often justified as a means to support domestic industries and stimulate economic growth, they can distort international trade by providing an unfair advantage to domestic producers. Subsidies lower the production costs of domestic goods and services, making them more competitive in international markets compared to foreign counterparts. This policy interferes with free trade by distorting market forces and creating an uneven playing field for international competitors. It can lead to overproduction and the dumping of subsidized goods in foreign markets, damaging the competitiveness of local industries.
Step-by-step explanation:
These policies interfere with the principles of free trade by distorting market conditions, favoring domestic industries, and restricting the choices available to consumers. While governments may implement such policies for various reasons, they can create trade imbalances, reduce efficiency, and hinder the overall benefits of open and competitive international markets.