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Globalization - The Barriers to International Trade


Globalization - The Barriers to International Trade

The most commonly used barriers to international trade are called tariffs. Tariffs are a kind of tax imposed on imported goods(and sometimes exported goods) by the importing country. The reasons a country impose taxes if to protect a domestic sector of the economy from foreign competition and to create revenue for the government. 

Import tariffs raise the price of cheaper imported goods to protect domestic producers from foreign competition. The 'infant industry' argument that are most frequently used for this kind of protectionism, holds that the young domestic industry needs to be protected before they mature enough to be able to compete in the ruthless international market. 

In most developed countries the revenue raising aspect of tariffs are insignificant, but in developing countries it is a crucial source of government income. While other taxes are easy to avoid, tariffs are much more difficult to avoid since they are collected at the border. In some African countries as much as 30% of all government income comes from tariff revenues. 

Within a given country tariffs redistribute wealth from domestic consumers, who pay higher prices for protected goods, to domestic producers and the government. In the bigger picture they decrease a nations wealth however, since they cost consumers more than they benefit producers and the government.

Another barrier to trade is import quotas, which limits the amount of goods that can be imported into a given country. Sometimes only the threat of import quotas is enough to make foreign exporters adopt a voluntary restriction on exports. For example during the early 1980s Japan voluntarily limited its vehicle exports to the Unites States in order to avoid threatened US trade sanctions. 

Other non-tariff trade barriers exist for the same reason as tariffs, which is to increase the cost of imported goods as they come to the domestic market. An example of such a trade barrier is something called local content requirements, which specify that a good must contain a certain amount of domestic raw materials or labor. In Canada for instance television and radio shows are required to air a certain amount of Canadian-produced shows. Another such trade barrier is technical and product standards. For instance the European Union does not allow the import of any beef that was produced using growth hormones. The reason behind this standard is mostly the health of the consumer, but also sanitation, product safety, and the health of the environment.

To sum up - Protectionism can take many forms. The most common is tariffs, but several non-tariff barriers exist as well, such as import quotas and local content requirements. 

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Source: The Bedside Baccalaureate 

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Great article, nicely explained.

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shahriar@ on June 13, 2012:

Nice explanation indeed. would be great if other relevant theory is also discussed

teedzy01 on June 05, 2012:

try to give more points , expressed in an economist view,.......but above all , thanks for the rich content on February 10, 2011:

try to provides Qns so that to create capacity of enough revisions 4 learners

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