Trade between various countries of the world has taken place for many hundreds, perhaps thousands, of years. Originally trade enabled people to obtain food and materials that they could not produce for themselves. For example, the UK does not have a climate suitable for growing bananas, and therefore needs to import these from abroad.
More recently, it has been recognized that some countries are 'better' at producing certain types of product than others. (By 'better' I mean that the country can produce the good more cheaply, quickly or efficiently.)
It seems to make sense then, for countries to specialize in producing the goods that they can produce most efficiently, and to trade their surpluses of those goods for the products they cannot produce, or are less efficient at producing. This is known as the principle of free trade.
Chart below shows countries that have the highest trade tariffs:
Chart below, shows countries with the lowest trade tariffs:
What is the main difference between these countries? First thing that we can easyly notice is the volume of GDP per capita. Countries with high trade tariffs are low-income countries. Those states have much lower GDP per capita than the rest of the World. These coutries have much lower purchasing power than the others. Most of countries imposing high tariffs are generally developing nations. Some of them are highly dependent on import duties for their tax revenue. Countries with high GDP per capita have much lower tariffs. That increases nationl welfare.
As I stated in a previous part of our assigmnent countries with lower trade tariffs are much closer to free trade, what increases national welfare. For example Trade liberalization domestic deregulation have transformed New Zealand's economy from one of the most heavily protected and regulated...