allows us to send instant electronic mail (e-mail) and talk (voice-mail) across
the world at negligible costs.

Let us return to the example of import of Chinese toys in India. Suppose, the
Indian government imposes a tax on import of toys. And because of the tax, buyers
will have to pay a higher price on imported toys. Chinese toys will no longer be as
cheap in the Indian markets, imports from China will automatically reduce and Indian
toy-makers will prosper.

Tax on imports is an example of trade barrier. It is called a barrier because
some restriction has been set up. Governments can use trade barriers to increase or
decrease (regulate) foreign trade and to decide what kinds of goods and how much of
each, should come into the country.

The Indian government, after Independence, had put barriers to foreign trade and
foreign investment. This was considered necessary to protect the producers within
the country from foreign competition. Industries were just coming up in the 1950s
and 1960s and competition from imports at that stage would not have allowed these
industries to survive. Thus, India allowed import of only essential items such