C. Protectionism

Governments, unlike most economists, often want to protect various areas of the economy. These include agriculture - so that the country is certain to have food - and other strategic industries that would be necessary if there was a war and international trade became impossible. Governments also want to protect other industries that provide a lot of jobs.

Many governments impose tariffs or import taxes on goods from abroad, to make them more expensive and to encourage people to buy local products instead. However, there are an increasing number of free trade areas, without any import tariffs, in Europe, Asia, Africa and the Americas.

The World Trade Organization (WTO) tries to encourage free trade and reduce protectionism: restricting imports in order to help local products. According to the WTO agreement, countries have to offer the same conditions to all trading partners. The only way a country is allowed tq try to restrict imports is by imposing tariffs. Countries should not-use import quotas - limits to the number of products which can be imported - or other restrictive measures. Various international agreements also forbid dumping - selling goods abroad at below cost price in order to destroy or weaken competitors or to earn foreign currency to pay for necessary imports.