Barriers to Trade

Barriers are established by the nations to protect the domestic industries from competition from the foreign firms

Barriers on Trade
• The barriers generally include two types of
strategies
▫ Tariffs strategy ▫ Non Tariffs Strategy

Export Tariffs Import Transit Barriers Quotas

Non Tariffs
Barriers to Trade

Subsidies Others

Tariffs Strategies
 Tariffs are the taxes imposed on goods involved in
international trade  Import Tariffs : imposed on goods imported  Export Tariffs : imposed on goods to be exported  Transit Tariffs : imposed on goods passing through one country bound for another  Ad Valorem : imposed on the value of goods imported  Specific Tariffs : imposed depending upon the specific attributes of the goods like weight, quantity, quality, likes etc.

Non Tariffs Strategy
• Any government regulation, policy or procedure other than Tariffs that has the effect of restricting international trade, becomes a Non-Tariffs barriers. • These can take 3 forms :
▫ Quotas

▫ Subsidies
▫ Other barriers

Import Quotas
• Quotas refers to numerical limits on the quantity of goods that may be imported into a country • The quantity is specified in the license issued to a group of individuals or a firm • The importer has to pay a penalty if the quantity exceeds the prescribed quantity • Voluntary Export Restraints(VER) is a quota on trade imposed by the exporting country, typically on the request of the importing country. • Foreign producer agreed to this VER as they feared , a more powerful import quota may come in existence if not adhered to VER

Subsidies
• A subsidy is a government payment to a domestic

producer.
• Subsidies take several forms including cash grants, low interest loans, tax breaks, govt. equity participation in local firms. • Subsidies help domestic Producer in 2 ways :

▫ Helps
imports

competing

against

low-cost

foreign

▫ Gain access to export markets

Administrative Policies
• To safeguard certain products policies were
framed in order to declare those products as high subsidy goods. • Imported goods would automatically become expansive giving advantage to the domestic product to flourish .

Anti Dumping Policies
• Defined as
▫ Selling goods in a foreign market below production costs ▫ Selling goods in a foreign market below fair market value

• Result of
▫ Unloading excess production. ▫ Predatory behavior

• Remedy: seek imposition of tariffs