Question

Identify whether each scenario describes a drawback or an advantage of trade regulation. benefit of trade regulations drawback of trade regulations

Answer 1

When a drawback is imposed, US manufacturers are allowed to access rebates on taxes on goods they import to the country, as well as when they export them again. This is considered as something beneficial for local manufacturers, as they are able to improve their competitiveness towards overseas competitors who probably have less labor or material costs. In the overall scenario, this represents an advantage of trade regulation as it fulfills the purpose of increasing trade.

When a government grants benefits to producers, in order to foment the development of certain sectors, this represents an overall disadvantage, as there could be a potential inefficient assignment of resources due to the fact that there could be other sectors that could end up being more profitable for the country if they were to be assigned resources.