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.[5]
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.[6]
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.[7]
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.[8]
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.[9]
Tariffs raise the government's revenue and the cost of imported goods, giving domestically produced goods a pricing advantage [10]
Nontariff Trade Barriers
Although tariffs have historically been the most effective form of trade restriction, there are numerous other sorts, including import quotas, voluntary export restrictions, and anti-dumping actions [11],[12]
Import Quotas
After the postwar era, the significance of non-tariff trade obstacles expanded dramatically. The most significant non-tariff trade barrier is a quota. It is a quantitative restriction on the quantity of a product that can be imported or exported.[13]
Anti Dumping Laws
In international trade terminology, "dumping" refers to price discrimination in favor of exports. Dumping could occur between several importing countries and between various buyers. WTO defines dumping in Article VI of GATT 1994; the agreement on implementation of Article VI of GATT, often known as the Anti-dumping agreement.[14]
Voluntary Export Restraints
Voluntary Export Restraints refer to the situation in which an importing nation compels another nation to "voluntarily" reduce its exports of a commodity, under the prospect of increased global trade restrictions, when these exports threaten an entire domestic industry. [15]
Technical, Administrative, and Other Regulations
In addition, several technical, administrative, and other regulations hinder international trade. These include safety restrictions for automobiles and electrical equipment, health laws for the sanitary manufacturing and packing of imported foods, and origin and content labeling requirements.[16]
Footnotes
- ↑ (Trade Barrier | Access2Markets, n.d.)
- ↑ (Krugman et al. 2018, p.28).
- ↑ (Salvatore 2013, p.221)
- ↑ (Krugman et al. 2018, p.28).
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (Trade Barriers | Access2Markets, n.d.)
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (Ikhenei, 2014)
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (World Trade Organization, n.d.)
- ↑ (Salvatore 2013, pp.221-263)
- ↑ (Salvatore 2013, pp.221-263)
References
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
European Commission. (n.d.). Trade barriers. Trade barrier | Access2Markets. Retrieved November 6, 2022, from https://trade.ec.europa.eu/access-to-markets/en/content/trade-barriers
Ikhenei, A. (2014, May 23). Dissertation: Determining Whether Free Trade or Protectionism Serves as the Most Effective Trade Policy for the Libyan Poultry Meat Sector. https://esource.dbs.ie/bitstream/handle/10788/1807/mba_ikheneifir_2014.pdf?sequence=1&isAllowed=y
Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International Trade: Theory & Policy (p.28) (11th Edition). Pearson Education. Retrieved November 6, 2022, from https://www.pdfdrive.com/international-trade-theory-policy-d184714398.html
Salvatore, D. (2013). International Economics (pp.221-263) (Eleventh Edition). Wiley. Retrieved November 6, 2022, from https://www.pdfdrive.com/international-economics-e186425030.html
World Trade Organization. (n.d.). General Agreement on Tariffs and Trade 1994 (GATT 1994), Article VI. Retrieved November 6, 2022, from https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art6_e.pdf
Author: Annija Petersone
