Sample interview questions: How would you evaluate the economic impact of trade barriers on domestic industries?
Sample answer:
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Negative Impacts:
- Increased Costs: Trade barriers such as tariffs and quotas raise the prices of imported goods, which can lead to increased costs for domestic producers who use imported inputs, as well as for consumers who purchase imported goods.
- Reduced Competition: Trade barriers can reduce competition in domestic markets by making it more difficult for foreign companies to enter and compete. This can lead to higher prices, lower quality goods, and reduced innovation.
- Reduced Export Opportunities: If a country imposes trade barriers, other countries may retaliate with their own trade barriers, which can reduce the exporting opportunities for domestic industries.
- Misallocation of Resources: Trade barriers can lead to the misallocation of resources by encouraging the production of goods that are less efficient than imported goods. This can lead to lower economic growth and productivity.
- Job Losses: In some cases, trade barriers can lead to job losses in domestic industries that are unable to compete with imported goods.
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Positive Impacts:
- Protection of Infant Industries: Trade barriers can be used to protect infant industries, which are new and may not yet be competitive with foreign firms, giving them time to grow and develop.
- National Security: Trade barriers can be used to protect national security by limiting the import of goods that are deemed essential for national defense.
- Environmental Protection: Trade barriers can be used to protect the environment by limiting the import of goods that are produced using environmentally harmful methods.
- Employment: Trade barriers can help to maintain employment in certain industries, even if it is at the cost of consumers and other industries.<... Read full answer
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