Barriers to trade
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According to European Commission [1], “A trade barrier refers to any regulation or policy that restricts international trade, especially tariffs, quotas, licenses, etc.”
The beginning and idea of International Trade Barriers
The single most fundamental understanding in international economics is that trade has benefits; when countries sell goods and services to one another, there is always a mutual advantage[2]
Free trade increases global output and benefits all nations. However, practically all states restrict the free flow of international trade in some way with different trade barriers. Since these limits and regulations apply to the trade or commerce of the nation, they are commonly referred to as trade or commercial policies.[3]
The history of trade barriers goes back to the 16th of century, since the emergence of modern nation-states when governments have been concerned about the impact of international competition on the prosperity of domestic industries. They have either attempted to shield domestic industries from foreign competition by limiting imports or to aid them in international competition by subsidizing exports [4]
Barriers to trade
There are various types of barriers to trade. They are divided into two types: Tariffs as the most common and non-tariff barriers.[3]
Tariffs
Historically, the tariff has been the most important form of trade restriction. It is a tax or duty imposed on a good as it crosses a national border. A tariff on an imported good is an import tariff, while a tariff on an exported good is an export tariff. Import duties are more significant than export duties.[3]
The U.S. Constitution prohibits export tariffs, but developing nations frequently impose them on traditional exports (such as Ghana on its cocoa and Brazil on its coffee) to increase prices and profits. Due to the ease of collection, developing nations rely primarily on export levies to increase their revenue.[3]
In contrast, industrialized nations inevitably implement tariffs or other trade barriers to safeguard some (often labor-intensive) industries while mainly relying on income taxes to generate money.[3]
Tariffs could be ad valorem, specific, or compound. The ad valorem tariff is a constant proportion of the traded commodity's value ((percentage of value)). The specific tariff is expressed as a fixed amount per unit of the traded good. A compound tariff combines an ad valorem tariff with a particular tariff.[3]
Tariffs raise the government's revenue and the cost of imported goods, giving domestically produced goods a pricing advantage [5]
References
Author: Annija Petersone
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- ↑ European Commission. (n.d.). Trade barrier. Trade barrier | Access2Markets. Retrieved November 6, 2022, from https://trade.ec.europa.eu/access-to-markets/en/glossary/trade-barrier
- ↑ Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International Trade: Theory & Policy (p.28) (11th Edition). Pearson Education.
- ↑ Salvatore, D. (2013). International Economics (pp.221-263) (Eleventh Edition). Wiley.
- ↑ Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International Trade: Theory & Policy (p.28) (11th Edition). Pearson Education.
- ↑ European Commission. (n.d.). Trade barrier. Trade barrier | Access2Markets. Retrieved November 6, 2022, from https://trade.ec.europa.eu/access-to-markets/en/content/trade-barriers
