Removing barriers or restrictions set by the government on foreign trade and foreign investment is known as liberalisation. It is an economic policy that aims to promote free trade and open up markets to foreign competition. Here is a detailed explanation:
Liberalisation:
- Liberalisation refers to the process of removing restrictions and regulations that hinder international trade and investment.
- It involves reducing barriers such as tariffs, quotas, and licensing requirements that limit the entry of foreign goods and services into a country.
- By liberalising trade and investment, countries aim to increase economic efficiency, promote competition, attract foreign direct investment (FDI), and stimulate economic growth.
- Liberalisation can be unilateral, where a country removes restrictions on its own, or it can be part of international trade agreements where multiple countries agree to reduce trade barriers collectively.
- It often involves the negotiation and signing of free trade agreements (FTAs) or joining regional trading blocs.
- Liberalisation can also extend to the financial sector, allowing foreign investors to enter and compete in domestic financial markets.
Benefits of Liberalisation:
- Increased competition: Liberalisation promotes competition, which can lead to improved product quality, lower prices, and greater consumer choice.
- Economic growth: Opening up markets to foreign trade and investment can stimulate economic growth by attracting capital, technology, and expertise from abroad.
- Job creation: Liberalisation can create employment opportunities as foreign companies establish operations or invest in local businesses.
- Access to new markets: Liberalisation allows domestic companies to access new export markets, diversifying their customer base and increasing their revenue.
- Innovation and technology transfer: Foreign competition can drive domestic companies to innovate and adopt new technologies, leading to productivity gains and increased competitiveness.
In conclusion, liberalisation plays a crucial role in promoting international trade and investment by removing barriers and restrictions set by the government. This policy aims to enhance economic efficiency, foster competition, attract foreign investment, and stimulate economic growth.