Trade Barriers
Trade barriers are measures taken by governments or public authorities to make imported goods or services less competitive than locally produced goods and services.
But not everything that prevents or restricts trade can be characterised as a trade barrier.
The barriers include the following forms:
- Tariffs
- Non-tariff barriers to trade
Non-tariff barriers are as follows:
- Import licenses
- Export licenses
- Import quotas
- Subsidies
- Voluntary Export Restraints
- Local content requirements
- Embargo
- Currency devaluation
- Trade restriction
Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products.
It is accepted that in many cases, products are liable to customs duties when imported into a market and that imported products ought to be accompanied by the correct documentation. In some cases, however, customs duties may be unreasonably high or customs clearance may take an unreasonably long time.
Trade barriers are often criticized for the effect they have on the developing world. Because rich countries call most of the shots and set trade policies, goods such as crops that developing countries are best at producing still face high barriers. Trade barriers such as taxes on food imports or subsidies for farmers in developed economies lead to overproduction and dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs also tend to be anti-poor, with low rates for raw commodities and high rates for labor-intensive processed goods. The Commitment to Development Index measures the effect that rich country trade policies actually have on the developing world.
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 are an obstacle for 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.
Examples of free trade areas are: North American Free Trade Agreement (NAFTA), South Asia Free Trade Agreement (SAFTA), European Free Trade Association, European Union (EU), Union of South American Nations, Gulf Cooperation Council common market.
