Trade Barrier
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Trade barriers are government-induced restrictions on
international trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (See: World economy.) In most countries, such trade represents a significan ...
. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall
economic efficiency In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts: * Allocative or Pareto efficiency: any changes made to assist one person would harm another. * Productive efficiency: no addit ...
. Most trade barriers work on the same principle: the imposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price or availability of the traded
products Product may refer to: Business * Product (business), an item that can be offered to a market to satisfy the desire or need of a customer. * Product (project management), a deliverable or set of deliverables that contribute to a business solution ...
. If two or more nations repeatedly use trade barriers against each other, then a
trade war A trade war is an economic conflict often resulting from extreme protectionism, in which states raise or implement tariffs or other trade barriers against each other as part of their commercial policies, in response to similar measures imposed ...
results. Barriers take the form of
tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...
s (which impose a financial burden on imports) and
non-tariff barriers to trade Non-tariff barriers to trade (NTBs; also called non-tariff measures, NTMs) are trade barriers that restrict imports or exports of goods or services through measures other than the imposition of tariffs. Such barriers are subject to controversy and ...
(which uses other overt and covert means to restrict imports and occasionally exports). In theory,
free trade Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold Economic liberalism, economically liberal positions, while economic nationalist politica ...
involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as
agriculture Agriculture encompasses crop and livestock production, aquaculture, and forestry for food and non-food products. Agriculture was a key factor in the rise of sedentary human civilization, whereby farming of domesticated species created ...
and
steel Steel is an alloy of iron and carbon that demonstrates improved mechanical properties compared to the pure form of iron. Due to steel's high Young's modulus, elastic modulus, Yield (engineering), yield strength, Fracture, fracture strength a ...
.


Overview

High-income countries tend to have fewer trade barriers than middle income countries which, in turn, tend to have fewer trade barriers than low income countries. Small states tend to have lower trade barriers than large states. The most common trade barriers are on agricultural goods. Textiles, apparel and footwear are the manufactured goods which are most commonly protected by trade barriers. Tariffs have been declining in the last twenty years as the influence of the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization headquartered in Geneva, Switzerland that regulates and facilitates international trade. Governments use the organization to establish, revise, and enforce the rules that g ...
has grown, but states have increased their use of non-tariff barriers. According to Chad Bown and Meredith Crowley, world trade is "probably" vastly more liberal in current times than was the case historically. According to Ronald Findlay and Kevin H. O’Rourke, "for the nineteenth and twentieth centuries trade barriers and transport costs were the most important barriers to trade". They also write, "during the mercantilist era price gaps were as likely to be due to trade monopolies, pirates, and wars as to transport costs and tariffs, which are more easily quantifiable."
Georgetown University Georgetown University is a private university, private Jesuit research university in Washington, D.C., United States. Founded by Bishop John Carroll (archbishop of Baltimore), John Carroll in 1789, it is the oldest Catholic higher education, Ca ...
Professor Marc L. Busch and
McGill University McGill University (French: Université McGill) is an English-language public research university in Montreal, Quebec, Canada. Founded in 1821 by royal charter,Frost, Stanley Brice. ''McGill University, Vol. I. For the Advancement of Learning, ...
Professor Krzysztof J. Pelc note that modern trade deals are long and complex because they often tackle
non-tariff barriers to trade Non-tariff barriers to trade (NTBs; also called non-tariff measures, NTMs) are trade barriers that restrict imports or exports of goods or services through measures other than the imposition of tariffs. Such barriers are subject to controversy and ...
, such as different standards and regulations, in addition to
tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...
s. Due to steadily decreasing tariff barriers since
World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...
, countries have become increasingly likely to enact trade barriers in forms other than tariffs. National firms often lobby their own governments to enact regulations that are designed to keep out foreign firms, and modern trade deals are one way to do away with such regulations. The barriers can take many forms, including the following: *
Tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...
s *
Non-tariff barriers to trade Non-tariff barriers to trade (NTBs; also called non-tariff measures, NTMs) are trade barriers that restrict imports or exports of goods or services through measures other than the imposition of tariffs. Such barriers are subject to controversy and ...
include: ** Import licenses **
Export control Export control is legislation that regulates the export of goods, software and technology. Some items could potentially be useful for purposes that are contrary to the interest of the exporting country. These items are considered to be ''controlled ...
/ licenses **
Import quota An import quota is a type of trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. An import embargo or import ban is essentially a zero-level import quota. Quotas, ...
s **
Subsidies A subsidy, subvention or government incentive is a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy. It ensures that individuals and households are viable by having acce ...
**
Voluntary Export Restraints A voluntary export restraint (VER) or voluntary export restriction is a self-imposed, voluntary restriction implemented by an exporting country, on the volume of its exports to another country. This can be negotiated between governments, or with ...
** Local content requirements **
Embargo Economic sanctions or embargoes are commercial and financial penalties applied by states or institutions against states, groups, or individuals. Economic sanctions are a form of coercion that attempts to get an actor to change its behavior throu ...
** Currency devaluation **
Trade restriction A trade restriction is an artificial restriction on the trade of goods and/or services between two or more countries. It is the byproduct of protectionism. However, the term is controversial because what one part may see as a trade restriction ...


Impacts of trade barriers on business

Trade barriers are often criticized for the effect they have on the developing world. Because rich-countries are able to set trade policies, goods, such as crops that developing countries are best at producing, still face high barriers. Trade barriers such as tariffs on food imports or subsidies for farmers in developed economies lead to
overproduction In economics, overproduction, oversupply, excess of supply, or glut refers to excess of supply over demand of products being offered to the market. This leads to lower prices and/or unsold goods along with the possibility of unemployment. T ...
and dumping on world markets, thus lowering world prices to the disadvantage of farmers in developing economies who typically do not benefit from such subsidies. The
Commitment to Development Index The Commitment to Development Index (CDI), published annually by the Center for Global Development, ranks the world's richest countries on their dedication to policies that benefit the five billion people living in poorer nations. Rich and poor ...
measures the effect that rich country trade policies actually have on the developing world. Trade barriers are mostly a combination of conformity and per-shipment requirements requested abroad, and weak inspection or certification procedures at home. The impact of trade barriers on companies and countries is highly uneven. One particular study showed that small firms are most affected (over 50%). Another negative aspect of trade barriers is that they result in a limited choice of products and would therefore force customers to pay higher prices and accept inferior quality. Trade barriers obstruct free trade. Before exporting or importing to other countries, firstly, they must be aware of restrictions that the government imposes on the trade. Subsequently, they need to make sure that they are not violating the restrictions by checking related regulations on tax or duty, and finally they probably need a license in order to ensure a smooth export or import business and reduce the risk of penalty or violation. Sometimes the situation becomes even more complicated with the changing of policy and restrictions of a country.


See also

* * * *
Free economic zone A free-trade zone (FTZ) is a class of special economic zone. It is a geographic area where goods may be imported, stored, handled, manufactured, or reconfigured and re- exported under specific customs regulation and generally not subjec ...
(includes Free Port). * * Free-trade area a region encompassing a
trade bloc A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states. Trade blocs can be stand-alo ...
whose member countries have signed a
free trade agreement A free trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating state (polity), states. There are two types of trade agreements: Bilateralism, bilateral and Multilateralism, m ...
. Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and to increase trade of goods and services with each other. **
North American Free Trade Agreement The North American Free Trade Agreement (, TLCAN; , ALÉNA), referred to colloquially in the Anglosphere as NAFTA, ( ) was an agreement signed by Canada, Mexico, and the United States that created a trilateral trade bloc in North America. The ...
(NAFTA) ** South Asia Free Trade Agreement (SAFTA) **
European Free Trade Association The European Free Trade Association (EFTA) is a regional trade organization and free trade area consisting of four List of sovereign states and dependent territories in Europe, European states: Iceland, Liechtenstein, Norway and Switzerland. ...
**
European Single Market The European single market, also known as the European internal market or the European common market, is the single market comprising mainly the member states of the European Union (EU). With certain exceptions, it also comprises Iceland, ...
**
Union of South American Nations The Union of South American Nations (USAN), sometimes also referred to as the South American Union, abbreviated in Spanish as UNASUR and in Portuguese as UNASUL, is an intergovernmental regional organization. It was set up by Hugo Chavez to ...
** New West Partnership (An internal free-trade zone in Canada between Alberta, British Columbia, and Saskatchewan) ** Gulf Cooperation Council common market *


References


External links


Databases on Trade Barriers

* ITC'
Market Access Map
an online database of customs tariffs and market requirements * ITC'
Non-Tariff Measures Business Survey
database, including regulatory and procedural obstacles that trading companies face both at home and abroad {{DEFAULTSORT:Trade Barrier International trade