If a country diminishes trade restrictions, making it easier for
foreign products to enter into the country, what happens to the GDP,
the general price level and unemployment?

Prices go down as cheaper imports replace domestic goods.

Unemployment increases as domestic suppliers get frozen out of business

GDP goes down ( the D in GDP stands for Domestic)

The counter effects are that removing trade restrictions normally
involve some sort of reciprocal arrangement.

Inward investment is handy - in the short term

Others open their markets, which might, or might not be helpful

In the case of hick states, like much of South America, people get
used to using 'hard' currency ... even if it is just for importing.

One should see a decline in corruption and the need to bribe people,
fences generally turn into toll booths.

Mostly the benefits of removing trade barriers are because they were
put there to benefit a small section of the population.

There is a lot to be said for stability and predicability
- but tariffs and trade restrictions encourage corruption

A couple of comments on the earlier post. 

?Inward investment is handy - in the short term? This is statement is
deceptive, foreign investments usually are made with the intent to
repatriate profits, so investments increase but the end result is that
more of the GDP get ?repatriated? to foreign corporations, the
repatriated profits inevitably exceed the initial ?investment? by
several orders of magnitude, after all that is why foreign
corporations ?invest? to get their money back and then some.

?In the case of hick states, like much of South America, people get
used to using 'hard' currency ... even if it is just for importing.? 
Often these ?hick? states are forced to use ?hard? currency precisely
because of the above mentioned method. The currency of these states
was once ?backed by gold? until forced off of it by unduly interaction
with more developed nations and economically imperialistic states like
the United States. Case in point the US needed a canal in Colombia to
cut costs since Colombia did not agree to the terms imposed by the US,
a US financed ?rebellion? took place and Colombia was split in two
creating the nation of Panama when Colombian forces attempted to
maintain the unity of their nation they had to face the US navy, being
unqualified to declare war against the US, Colombia accepted it?s
nation being split in two and Panama was created. Unitedstatians even
today over 100 years later still control the territory, the US was
displeased with Panamenian president Torrijos so he died in an
unexplained airplane accident and Noriega came to power, the man was
corrupt and  in 1989 Panama was invaded and dictator Noriega was
deposed by US forces without a formal declaration of war.

Some of these ?hick? states such as Venezuela, Bolivia and now Chile
have learned the lessons and are turning leftist, not so much because
that is the will of the people but because imperialism will inevitable
result in a whiplash response.

?- but tariffs and trade restrictions encourage corruption? only when
applied with same level of development nations. For instance
restrictions among Andean trading partners would injure all, however
failing to put restrictions in trading with more economically
developed nations i/e the US, will aid the transfer of what little
wealth there might be in these ?hick? nations into the pockets of
Unitedstatians and prevent the development of the local economy due to
the importation of foreign goods manufactured with nonexistent
technology at the local level, it encourages an uneven playing field
in which those that have the upper hand become richer while the poor
become poorer. Further establishing the continuance of economic
imperialism.

Coincidentally I was just reading a news article on CNN.com about the
US trade gap for 2005
 http://money.cnn.com/2006/02/10/news/economy/trade/?cnn=yes
some highlights of lack of trade barriers even on economically
developed nations as the US.

?The December report from the Commerce Department brought the
full-year trade gap up to $725.8 billion from the previous record of
$617.6 billion set in 2004,?
?So far the growing trade gap hasn't caused an economic crisis, partly
because foreign investors have continued to buy U.S. assets such as
government debt, essentially financing the growing trade gap. "Sooner
or later, foreigners will stop financing the deficit. But at this
point they show no signs of slowing down,"?
?That gap works out to an average of $2,448 per U.S. resident, up from
$2,103 per capita in 2004.?
?"Were the trade deficit cut in half, GDP would increase by nearly
$300 billion, or about $2,000 for every working American,"? (but he
meant Unitedstatian)
?If the trade gap grows at the same pace in 2006 and 2007, it will top
$1 trillion annually by the end of next year. ?
?By comparison, the U.S. had a positive trade balance with only six
countries identified in the report?

So you see failure to put restrictions in place can be
counterproductive. Now, if the rest of the world was to do the same
thing *everybody* forever then this would be an acceptable price to
pay but I?m willing to bet that at the rate we are going the US will
in time default on it?s loans making the US dollar darn near worthless
and a new global power will emerge, my money is on China in twenty
years.

The way I see it the US today closely resembles Great Britain at the
turn of the last century, a great power no doubt, but longing for
yesteryear and attempting to recapture a moment lost to history failed
to prepare for the future and in a couple of decades the US overtook
them making England a second class nation, status it still maintains.

I think this is important because it is not necessarily the only
possible outcome, it can be changed but it wont happen if we turn a
blind eye to global warming, if we don?t stop with pollution, if we
keep neglecting scientific research on the name of religion etc. We
must make this nation competitive again, we must pay as we go, we must
reduce the national debt, we must spend more on education and less on
teaching our kids to kill.

Elids-ga

I don't disagree with much of what you say
- but I am concerned about a few points

Currency stability is essential, being backed by gold is irrelevant.
'money is what money does'
- better use the US$ than (potential) toilet paper
- to a moderately small economy the benefits outweigh the downside

You have a valid point about 'free imports' zapping local production

I did not realize that Panama is an artificial construction, it is
easy to see why it is strategically important.

My take is that North America will gradually merge with South America,
Northward migration will change things back at home. People send back
cash and return themselves - so it is something of a two way
operation.

My main issue is that one needs a stable currency, even if it is not ones own.
Without it one is stuffed.

Obviously, as the question was framed, there are few advantages in
lifting trade restraints apart from the 'corruption' angle ... which
is fairly serious.

- but then, I'm just a renegade ex-economist

It may very much depend on where the country is on the scale of
restrictions as well as a lot of other things, such as trying to play
policeman to the world.

India could be a better example for an answer to the question, since
it started with high trade restrictions and after decades began to
reduce them, as this wikipedia site explains (I knew that before;
referencing with wikipedia just was convenient):
http://en.wikipedia.org/wiki/Economy_of_India

The first part of this site suggests a comparison with USA:
http://www.economywatch.com/indianeconomy/indian-economy-overview.html

There is  - I believe -  absolutely no question that India's reducing
trade and investment restrictions was the spark to its economic surge.

Its a really tough call.  it depends on which school of economics you
subscribe to.  And no matter which one you chose, empirical evidence
is mixed.  Look to the countries of the world.. what do you see?

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