RECIPE

NAME
30 minutes • Serves 4-6 International
Trade Barriers
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What are What are
trade trade
barriers? barriers?
Trade Barriers
Trade barriers are government-induced restrictions on international trade. According to the
theory of comparative advantage, trade barriers are detrimental to the world economy and
decrease overall economic efficiency.

A trade barrier refers to any regulation or policy that restricts international trade, especially tariffs,
quotas, licences etc.

Most trade barriers work on the same principle: the imposition of some sort of cost (money,
time, bureaucracy, quota) on trade that raises the price or availability of the traded product. If
two or more nations repeatedly use trade barriers against each other, then a trade war results.
Barriers take the form of tariff (which impose a financial burden on imports) and non-tariff
barrier to trade (which uses other overt and covert means to restrict imports and occasionally
exports). 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.
Major Trade Barriers

Tariff Barriers Non- tariff Barriers Quotas

Export Control Import Licenses Subsidies

Tariff Barriers

The english word tariff drives from the french word tarif which means “set
price”.

A tariff is a tax imposed by the government of a country or by a supranational

union on imports or exports of goods. Besides being a source of revenue for
the government, import duties can also be a form of regulation of foreign trade
policy that taxes foreign products to encourage of safeguard domestic
industry.
Protective tariffs are among the most widely used instruments of
protectionism.
Impact of Tariffs
Import tariffs raise the price of imported goods, thereby, giving domestically
produced goods a relative price advantage. A tariff may be protective even though
there is no domestic production in direct competition.

Although revenue tariffs are most commonly collected on imports, many countries
that export raw materials. Import taxes levied on certain goods entering a country
to protect domestic industries.
How do tariffs affect prices ?
1. Tariffs increase the price of imported goods.

2. Because of this, domestic producers are not forced to

reduce their price from increased competition, and
domestic consumers are left paying higher price as a
result.

3. Tariff also reduce efficiencies by allowing companies that

would not exist in a more competitive market to remain
open.
Non-tariff Barriers
A non-tariff barrier is any measure, other than a

customs tariff, that acts as a barrier to international

trade.

These include:

● regulations: Any rules which dictate how a

product can be manufactured, handled, or

advertised

● rules of origin: Rules which require proof of

which country goods were produced in

● quotas: Rules that limit the amount of a

Subsidies
A subsidy or government incentive is a type of government expenditure for individuals
and households, as well as businesses with the aim of stabilizing the economy. It ensures
that individuals and households are viable by having access to essential goods and
services while giving businesses the opportunity to stay competitive.

For instance, the government may distribute direct payment subsidies to individuals and
households during an economic downturn in order to help its citizens pay their bills and to
stimulate economic activity. Here, subsidies act as an effective financial aid issued when
the economy experiences economic hardship.They can also be a good policy tool to
revise market imperfections when rational and competitive firms fail to produce an optimal
market outcome.
Export Control
Export control is legislation that regulates the export of goods, software and technology. Some items
could potentially be useful for purposes that are contrary to the interest of the exporting country.
These items are considered to be controlled. The export of controlled item is regulated to restrict the
harmful use of those items. Many governments implement export controls. Typically, legislation lists
and classifies the controlled items, classifies the destinations, and requires exporters to apply for a
licence to a local government department.

A wide range of goods have been subject to export control in different jurisdictions, including arms,
goods with a military potential, cryptography, currency, and precious stones or metals. Some countries
prohibit the export of uranium, endangered animals, cultural artefacts, and goods in short supply in the
country, such as medicines.
Import Licenses
An import license is a document issued by a national government authorizing the importation of
certain goods into its territory. Import licenses are considered to be non-tariff ti trade when used as a
way to discriminate against another country's goods in order to protect a domestic industry from
foreign competition.

Each license specifies the volume of imports allowed, and the total volume allowed should not exceed
the quota. Licenses can be sold to importing companies at a competitive price, or simply a set fee.
However, it is argued that this allocation method provides incentives for political lobbying and bribery.
Governments may put certain restrictions on what is imported as well as the amount of imported
goods and services. For example, if a business wishes to import agricultural products such as
vegetables, then the government may be concerned about the impact of such importations of the local
market and thus impose a restriction.
Quotas
❖ A quota is a government-imposed trade restriction that limits
the number or monetary value of goods that a country can
import or export during a particular period.
❖ Countries use quotas in international trade to help regulate the
volume of trade between them and other countries.
❖ Countries sometimes impose quotas on specific products to
reduce imports and increase domestic production.
 Import Quotas Export Quotas

Export quotas limit the quantity

Import quotas restrict the quantity
of specific goods that can be of certain goods that can be
imported into a country during a exported from a country.
specified period. This is typically Governments may implement
done to protect domestic export quotas to ensure
industries from foreign sufficient domestic supply,
competition and to maintain a
control prices, or meet
balance of trade
international agreements.
Others Reasons

Differences in Cultural
language Differences Trade and
Investment
Restriction

Managing Global High Cost of Currency Exchange

Terms Distance and Inflation rate
 Cultural Epic Fails
Brand gone wrong

❖ KFC
❖ BENZ
❖ McDONALD’S
KFC :
This might come as a surprise,
seeing as KFC is generally known
as an extraordinary success story
in China. Yet, in the beginning,
KFC made Chinese consumers a
bit apprehensive when "finger
licking good" was translated as
"eat your fingers off."
Mercedes-Benz :
Mercedes-Benz faced a naming barrier in China due to
linguistic differences. When initially entering the market, their
brand name was translated as "Bensi," which phonetically
sounded like "rush to die" in Chinese. This unintended
translation created negative connotations, hindering the brand's
reception. Mercedes-Benz later rebranded to "Benchi", which
carries positive associations of speed and advancement,
effectively overcoming the initial linguistic barrier and
enhancing its appeal in the Chinese market.
McDonald’s :
This example is of culture difference.

When McDonald's entered the Indian market in the 1990s, it faced several challenges due
to cultural differences and dietary preferences. One of the biggest hurdles was adapting its
menu to suit the Indian palate, which predominantly prefers vegetarian options and has
strict dietary restrictions, especially regarding beef consumption due to religious beliefs.

To overcome these cultural barriers, McDonald's introduced a range of vegetarian options

tailored to Indian tastes, such as the McAloo Tikki Burger and the Paneer Wrap.
Additionally, McDonald's ensured that its restaurants in India followed strict guidelines
for food preparation and sourcing to cater to religious and cultural sensitivities.
CONCLUSION
● In conclusion, trade barriers can have significant impacts on global commerce,
affecting not only the economy but also political relations between nations. While
they may offer short-term benefits to certain industries or countries, in the long run,
they often lead to inefficiencies, reduced competition, and higher prices for
consumers. As the world becomes increasingly interconnected, efforts to reduce or
eliminate trade barriers through negotiations and agreements are crucial for fostering
economic growth, innovation, and cooperation on a global scale.
 THANK YOU

Bhoomika
Choudhary - 244

Kunika Nagar - 270