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Barriers To International Trade

By international trade we mean the exchange of goods and/or services. This exchange usually takes place between two parties from different countries or between two countries located anywhere on the globe. If the international trade takes place between two parties, it is known as bilateral trade and if the trade takes place between more than two parties, it is known as multi-lateral trade. There are basically three barriers to international trade that are used by countries, and they are as follows: 1. Non-tariff Barrier Usually this type of barrier is imposed by a country on imports so that the quantity of imported items is restricted. Due to this, the availability of the imported item or items is restricted in the domestic market and the price too is very high. 2. Tariff Barriers This is barrier is in the form of duties, taxes, quotas etc. Because of this barrier, imports decrease and price of imported products increase which results in the fall in the demand giving boost to domestic products. 3. Voluntary Constraints This is a type of international trade barrier wherein a country voluntarily restricts or stops imports from coming in. This is usually used to limit the competition that domestic industries will face with the coming in of imported goods. Whenever a country starts international trade with another country, these three barriers to international trade are always taken into account. It has been seen that lower developed countries and developing countries tend to favor these three barriers to international trade as the countries can earn foreign exchange by introducing tariff and non-tariff barrier. The local industries are protected from competition by foreign companies and industries and as less imported goods are available in the country, consumers tend to buy local products giving the local industries a boost.

Trade barrier
Trade barriers are government-induced restrictions on international trade.[1] The barriers can take many forms, including the following:

Tariffs Non-tariff barriers to trade


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. If two or more nations repeatedly use trade barriers against each other, then a trade war results. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can be explained by the theory of comparative advantage. In theory, free trade 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 and steel. Trade barriers are often criticized for the effect they have on the developing world. Because rich-country players 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 measures the effect that rich country trade policies actually have on the developing world. Another negative aspect of trade barriers is that it would cause a limited choice of products and would therefore force customers to pay higher prices and accept inferior quality.[3] Examples of free trade areas

North American Free Trade Agreement (NAFTA) South Asia Free Trade Agreement (SAFTA) European Free Trade Association European Union (EU)

Union of South American Nations

New West Partnership (An internal free-trade zone in Canada between Alberta, British Columbia, and Saskatchewan)

Gulf Cooperation Council common market