Investigate the arguement for restricting trade and provide argunmats Essay

Investigate the arguement for restricting trade and provide argunmats for not restricting trade. Also list and explain some coun - Essay Example In time, trade has gone through revolutionizing changes with the advent of a legal tender system. This saw trade become widespread and global in perspective because of the new terms of valuation. These new terms of valuation made it easier to conduct trade because, unlike barter trade, it was easier to carry money for long distances than the actual goods. This paper aims at investigating the arguments for restricting trade and those for not restricting trade. Restrictive trade originated in the late 1800s where rich merchants involved in trade of high value products and services sought to create monopolies in the market so that they could control the market (GILLIES, 2004: 862). This amounted to restricting trade through the formation of international organisations for traders and manufacturers of a few select items that were of high value and demand in the market. An organisation like this is allied, by agreement, to control the natural elements of supply and demand, in the market. They achieve this by fixing prices and quotas for sales, divide markets and limit supply (GILLIES, 2004: 867). These restrictive trade practices end up eliminating competition in the market, which creates a precedent for consumer exploitation. Competition, in the market, keeps all the players, in check, by ensuring that they all strive to satisfy the consumers’ needs, or risk losing out to those who fulfil their customers’ needs. Without competition in the market place, the consumers would be faced, with the aspect exploitation from unscrupulous traders out, to make a profit at the expense of consumers. When a system of trade restricts trade practices among its players, it predisposes consumers to exorbitant and unaffordable prices. Consumers are supplied with substandard goods and services because there is no alternative source of the products they seek. Elimination of competition by restricting trade robs consumers of the freedom and right of choice regarding the qua lity and supply of commodities they desire and need (BRUCE, 2001: 56). Limitation of supply creates high demand for goods and services, which exposes consumers to abuse through over pricing. Restricting trade has seen a decline in trade volume because it reduces consumers’ purchasing power and decreases the number of traders allowed to participate, in a given trade. Restriction on trade has also contributed to protection of inefficient and unqualified traders in the market who add no value to consumers or the economy of the country. Restriction on trade has seen to the development of domestic and international organisations that operate like cartels because of their characteristic monopolising of markets of their interest (FRANK & BERNANKE, 2003: 419). Beneficiaries of these organisations advocate and support these cartels by arguing that they help protect participating firms that are weak thus shielding them from unfair competition. According to most studies, business entiti es that benefit from restricted trade systems postulate that this structure of trade helps these firms deal with limitations caused by high business operating tariffs (BRUCE, 2001: 78). Cartels created because of restrictive trade systems are able to distribute risks and profits equally amongst themselves which acts as a cushion against uncertainty in the market. This uncertainty can be