Understanding Global Trade Barriers

Free trade benefits consumers through increased choice and reduced prices, but because the global economy brings with it uncertainty, many governments impose tariffs and other trade barriers to protect the industry. Anything that impedes international trade is known as a trade barrier.

These barriers act as protectionist measures. They are used and are being imposed to reduce import flows into their respective countries. These measures are put in place for both goods and services. Although countries benefit from trade and may want to increase their international trade volumes with other countries, there are some limitations to the volume they can trade,

There are many reasons why two countries could face trade barriers. It could also be a result of government policies that aim to reduce the number of imported goods into the country. The practice of protecting domestic industries from imports

Three Trade Barriers That Affect Your Business:

Tariffs

While a tariff generates government revenue, its more important effect is to raise the price of the imported product.

Its purpose is to “protect” the domestic product from competition by insuring that foreign products are the higher-priced and therefore less desirable\ alternatives.

Quotas

Although its effect is indirect, a quota is similar to a tariff in that it raises the price of the imported product.

Restricting the supply puts upward pressure on the price of the import, making the domestic product the lower-priced alternative.

Unlike tariffs, quotas do not generate government revenue.

Having the same effect, tariffs and quotas limit imports and protect domestic producers from foreign competition.

Non-Tariff Barriers

Non-tariff obstacles include regulations, licenses, and sanctions to limit the amount of commerce they undertake with other countries as part of their political or economic strategy.

Although International trade has grown significantly over the last century because countries have become more integrated, and as cross-border shipping of goods and providing of services have become easier and cheaper, tariff barriers, on the other hand, make a nation self-sufficient and also reduce dependency on foreign goods. It increases the number of goods that domestic consumers can choose from, decreases the cost of those goods through increased competition, and allows domestic industries to ship their products abroad. While non-tariff barriers act as hindrances to international trade, these can be legal or bureaucratic. Tariffs, quotas, and other trade barriers are great at protecting the local producers of the protected goods. These domestic producers can supply a higher quantity of goods at a higher price.

But there are negative effects associated with trade barriers: Disadvantages of trade barriers include reduced competition, harm to consumers, harm to other domestic producers, and potential trade wars.

If you'd like to discuss any of this information and how it relates to your business call our friendly sales team today on +61 2 9773 1378 or email sales@imageinternational.com.au