Q.:- What do you understand by liberalization of foreign trade?
There are two restrictions on foreign trade (i.e., trade of goods and services between two sovereign nations) which are removed by liberalization of foreign trade.
(a) Entry Tax or Customs Duty This is levied on goods being imported into a country to protect the local producer of similar goods. This makes the foreign goods costlier, so that the local goods can compete with it on price. Under liberalization, ideally there will be no customs duty on any imported product.
(b) Quotas or Restrictions on the Quantity being Imported in a Specified Period This will prevent cheap foreign goods being ‘dumped’ or ‘flooding’ the market of another country. Under liberalization, there will be no restrictions on the quantity of goods being imported from any country.