Barriers to Trade
Barriers to trade refer to any government-imposed restrictions or obstacles that hinder the free flow of goods and services between countries. These barriers can take the form of tariffs, quotas, subsidies, or regulations, and are designed to protect domestic industries from foreign competition. By limiting imports, barriers to trade can impact consumer choices, increase prices, and reduce overall economic efficiency.
7 Key excerpts on "Barriers to Trade"
eBook - ePub- Edward B Barbier, Joanne C. Burgess Barbier, Joshua Bishop, Bruce Aylward(Authors)
- 2021(Publication Date)
- Routledge(Publisher)
...Other less obvious non-tariff barriers may include health, safety and technical standards, anti-dumping and countervailing duty investigations, import licensing schemes or other measures which effectively increase the costs of importing goods. In addition, certain types of government industrial subsidies may be classed as non-tariff Barriers to Trade, particularly when they are intended to improve the competitive position of domestic firms relative to foreign producers. Both tariff and non-tariff Barriers to Trade can have significant economic impacts. On the one hand they reduce the absolute volume of trade, either directly by means of quantitative restrictions or indirectly by increasing the costs of bringing goods to market. At the same time, import restrictions also distort the pattern of trade, particularly when barriers differentiate among products or sources, by making certain goods seem artificially cheap or expensive relative to others. Import barriers effectively reduce both the quantity and the variety of goods supplied in the market while increasing the prices paid by consumers. In almost every case, therefore, consumers are made unambiguously worse off by import barriers. Foreign producers (exporters) lose both sales and profits, because trade barriers mean that they sell less than they could and, in most cases, at lower prices. These losses are only partly compensated by the benefit that import barriers provide to domestic producers, who may gain market share or a significant cost advantage relative to their foreign competitors. While import barriers can be an effective means of protecting profits and jobs in domestic industries, they therefore impose a high albeit hidden economic cost to domestic consumers as well as to foreign producers...
eBook - ePub- W. Charles Sawyer, Richard L. Sprinkle(Authors)
- 2020(Publication Date)
- Routledge(Publisher)
...This estimate makes intuitive sense. If this were not the case, then the growth rates of air transport mentioned above and the cost differential would be far harder to explain. SUMMARY The decline in tariffs in the past several decades has made nontariff trade barriers more important as a measure of protection. Between 10 and 15 percent of imports in the EU, Japan, and the U.S. are affected to one extent or another by nontariff Barriers to Trade. An import quota is a government-imposed limit on the amount of a good that can be imported. Quotas have many of the same effects as tariffs but are generally more restrictive. Quotas exist because some countries are either not members or new members of the WTO or simply ignore WTO rules. Also, quotas are common for agricultural products. The major difference between a quota and a tariff is that the government does not collect any revenue in the case of a quota, and this revenue generally accrues to the importer. If the government wants to capture this revenue, it could auction the import quota or impose an equivalent tariff. Different industrial policies such as taxes, labor standards, and business regulations can distort international trade. Governments discriminate against foreign suppliers in purchasing goods and services. This is important, as this buying constitutes 10 to 15 percent of world output. There are a variety of different technical Barriers to Trade. Government subsidies distort trade flows. Such subsidies can be directly tied to exports, but more commonly they are domestic subsidies that indirectly influence trade. The imposition of labor and/or environmental standards on developing countries would inhibit the growth of these countries. Labor standards would reduce the developing countries’ comparative advantage and make workers worse off...
eBook - ePubInternational Trade
New Patterns of Trade, Production and Investment
- Nigel Grimwade(Author)
- 2020(Publication Date)
- Routledge(Publisher)
...Usually, the main reason for doing so is to grant protection to a particular industry threatened by foreign competition. Protection may take the form of imposing tariffs on imports or the creation of various kinds of non-tariff barriers. Trade may also be distorted by government measures that favour domestic producers over foreign producers (e.g. granting a subsidy to a domestic producer). In the next two sections of this chapter, the effects of these kinds of government interference in trade are examined. We begin with tariffs because they are perhaps the most obvious form of government-imposed barrier to trade. Tariffs may take the form of a specific duty payable on each unit imported or an ad valorem tariff expressed as a percentage of the unit Box 8.1 The Effects of Increased Trade: Inter- and Intra-Industry Specialisation Compared The Effects of Inter-Industry Specialisation Static effects - lower prices and improved resource allocation Dynamic effects Economies of large plant size Increased price competition Increased capital investment Increased rate of technological change Higher output due to higher real incomes Industry trade balances widen - may lead to resistance to lowering trade barriers in import-competing sectors Adjustment costs Need for inter-sectoral re-allocation of factors Need for relative factor prices to change (where factor intensities differ between export and import-competing sectors) Distributional effects - price of country's scarce factor may fall relative to price of country's abundant factor The Effects of Intra-Industry Specialisation Static Effects More varieties of each type of good become available (love for variety) Consumers able to get a variety closer to their preferred type Some reduction in prices due to increased competition Dynamic Effects Scale economies due to more plant specialisation (long production...
eBook - ePubThe Regulation of International Trade
4th Edition
- Robert Howse, Antonia Eliason(Authors)
- 2013(Publication Date)
- Routledge(Publisher)
...7 Border measures Tariffs and quantitative restrictions TARIFFS OVERVIEW Tariffs are essentially taxes on imported goods, and they, as well as other customs duties, must be applied in accordance with the Most Favoured Nation (MFN) principle discussed in Chapter 2 of this book. Additionally, WTO Members may, but are not obligated to, commit to binding certain customs duties that may generally be understood as committing to maximum duties for particular products. 1 Binding is in accordance with the object and purpose of both the WTO Agreement and the GATT 1994. These two Agreements in their respective preambles recognize the desirability of ‘reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other Barriers to Trade’. Members’ commitments vary, are usually the product of multilateral trade negotiations, and are included in schedules of concessions which may be found in the annexes of the GATT. THE ECONOMIC EFFECTS OF A TARIFF The economic effects of a tariff on both importing and exporting countries are best understood by first examining the case of a prohibitive tariff, a tariff that is so high that it prevents all imports. Here we draw on an example provided by Ruffin and Gregory. 2 (See Figure 7.1.) With a prohibitive tariff, the prices paid for shirts in each country are determined by the supply and demand curves in each country. To compare prices, we assume that US$2 = £1. If there was no tariff, prices would be the same in the two countries. The prohibitive tariff in America raises the price in America from US$6 to US$9. Consumers lose area A + B, but producers gain area A. The net loss to America is area B. In the UK, prices fall from £3 to £2, and producers lose area C + D, while consumers gain C. The gain to consumers is less than the loss of producers. The net loss to Europe is area D. One can next consider a non-prohibitive tariff, which does not preclude all imports of a product...
eBook - ePub- Alice Landau(Author)
- 2005(Publication Date)
- Routledge(Publisher)
...3 The Agreement on Technical Barriers to Trade Since the creation of the GATT, tariffs have decreased and have been consolidated. During the Uruguay Round, consolidations increased from 78 to 99 per cent for developed countries, 21 to 73 per cent for developing countries and 73 to 98 per cent for economies in transition. All non-quantitative import restrictions have been tariffed, thus enabling the introduction of greater transparency in the agricultural domain and making way for the lowering of tariffs in this area of activity. Since the 1970s, however, the contracting parties have shown their concern at being confronted by the appearance of non-tariff barriers, and have come to the conclusion that technical barriers form the greatest deterrent to trade. The expression ‘technical barriers’ applies to the standards, but may equally comprise quotas and import licences. In view of the increase in problems applied to inspections, the Tokyo Round negotiated a code for standards, the aim of which was to adopt and apply regulations, standards and procedures to evaluate conformity. The Agreement on the Technical Barriers to Trade (TBT) was based on the Tokyo Round’s code and reinforced its obligations. The purpose of the agreement was to ensure that the regulations WTO members adopt do not create unnecessary barriers to international trade...
eBook - ePub- Enrico Colombatto(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...Finally, protection distorts incentives. Living behind the comfortable walls guaranteed by regulated trade is surely easier than fighting in a competitive arena. Thus, lobbying the government in order to extend the privileges of protection is more rewarding than striving every day to innovate and stay ahead of the rivals. Put differently, once they are shielded from competition, even the potentially good companies are tempted to neglect to operate in accord with the rule of competition (innovate and monitor costs), and incline towards devoting their energies to ensuring that the trade barriers are kept in place and perhaps strengthened. This is consistent with the evidence: the allegedly temporary protection awarded to potential future winners usually ends up being permanent, or much less temporary than originally intended. A final and possibly more compelling set of arguments in favour of restricted trade relates to income distribution and the cost of adjustment. The essence of this argument is based on the fear that international competition might create domestic economic tension. As mentioned earlier, free trade enhances competition, and competition means that successful firms survive and thrive, while the losers suffer income cuts or shut down. If the economy is not flexible enough to accept the losses or to create opportunities for the resources expelled from the losing firms and industries, unemployment and idle capacity might be widespread, and social strains might emerge. For example, when the textile industry was opened to international trade, many producers operating in Europe and America stopped production and closed their plants. Capital owners were affected, since they had purchased equipment and financed production in plants that were no longer competitive and had become a source of losses. Workers were also affected, of course, and unemployment increased, especially among the unskilled labour force...
eBook - ePubWorld Trade Organization (WTO)
Law, Economics, and Politics
- Bernard M. Hoekman, Petros C. Mavroidis(Authors)
- 2015(Publication Date)
- Routledge(Publisher)
...Complemented by the WTO Agreement on Safeguards. (XX) General exceptions provision—allows trade restrictions if necessary to attain non-economic objectives (health, safety). (XXI) National security exception. (XXII) Requires consultations between parties involved in trade disputes. (XXIII) GATT’s main dispute settlement provision, providing for violation and non-violation complaints. Complemented by the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes. (XXIV) Lays out criteria for the formation of free trade areas and customs unions. (XXVIII) Allows for renegotiation of tariff concessions. (XXVIII) bis Calls for periodic trade rounds to lower trade barriers. (XXXIII) Allows for accession of new members. Part IV Calls for more favorable and differential treatment of developing countries. WTO membership brings with it the obligation to abolish quantitative restrictions (QRs) (Art. XI GATT), and to participate in tariff negotiations (Art. XXVIII bis) aimed at establishing tariff ceilings for products. Such negotiated ceilings, generally called tariff “bindings,” establish maximum levels that applied tariffs may not exceed. By negotiating ceilings, tariff volatility beyond the agreed level becomes impossible, unless compensation is paid (Art. XXVIII GATT). There is, thus, some certainty regarding transaction costs. There is no obligation to bind tariffs—this is determined by negotiations. A binding obligation is to abide by the principle of non-discrimination, which is a legal obligation that binds the actions of WTO members with respect to both border (trade) policies and internal regulatory or tax policies, i.e. measures destined to apply to both domestic products and imports alike. Customs duties, other border measures and non-discrimination Since quantitative restrictions on imports and exports are prohibited by Art. XI GATT, and subsidies are regulated (by Art...
