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TRADE BARRIERS
What does actually Trade mean
The simplest definition of trade is - The business of
buying and selling of goods and services.

A bit more elaborate definition of trade could be like-
Trade is the transfer of ownership of goods and services
from one person or entity to another by getting
something in exchange from the buyer.

What is International Trade all about-
International trade is exchange of capital, goods, and
services across international borders or territories
What is Trade Barrier
Trade barriers refers to the government policies and
measures which obstruct the free flow of goods and
services across national borders
Why do countries impose trade barrier
Foremost reasons to impose Trade barriers are as
follows..

To protect domestic industries
To guard against dumping
To promote R &D
To conserve foreign exchange resources of the country.
To make the balance of payment position favorable.
To curb conspicuous consumption

Types of Trade Barriers
There are two types of trade barriers- -

Tariff Barriers
Non-Tariff Barriers
Classification of TARIFF BARRIERS
There are various types of Tariff Barriers, considering impact and application.

1. On the basis of origin and destination
a. Export duties
b. Import duties
c. Transit duties

2. On the basis for qualification of the tariff
a. Specific duties
b. Ad-valorem duties
c. Compound duties







Classification of TARIFF BARRIERS.continues


3. On the basis of application amongst different countries

a) Single-column tariff:
b) Double-column tariff
c) Triple-column tariff



4. On the basis of the purpose they serve

a) Revenue tariff
b) Protective tariff
c) Countervailing and Anti-Dumping Duties
Explanation of different TARIFF BARRIERS.
1. On the basis of origin and destination

a. Export duties: The duty which is levied on goods being taken
outside the country, to discourage their export.


b. Import duties: When duty is imposed on goods being brought
into the country, it is referred to as an import duty. Import duty is
levied to increase the effective cost of imported goods, with a view to
increasing the demand for domestically produced goods.

c. Transit duties: Tariff may also be imposed to discourage the
exporting of natural resources . When tax is imposed on goods
passing through the country, is called as Transit duty.

Explanation of different TARIFF BARRIERS. continues
2. On the basis for qualification of the tariff:


a. Specific duties: A specific duty is a flat duty, based on the number
of units regardless of the value of the goods.


b. Ad-valorem duties: An ad valorem duty is expressed as a
percentage of the value of the good.


c. Compound duties: A compound duty is a combination of specific
and ad-valorem duty.




Explanation of different TARIFF BARRIERS. continues
3. On the basis of application amongst different countries

a) Single-column tariff: Uniform rate of duty for all like commodities
irrespective of countries.


b) Double-column tariff: It discriminates between countries. i.
General (fixed) & conventional (results of commercial treaties) ; ii.
Minimum (concession /MFN) and Maximum schedule (applies to all)

c) Triple-column tariff: 3 autonomously determined tariffs. General ,
intermediate and the preferential (applies to mother country and its
colonies)


Explanation of different TARIFF BARRIERS. continues
4. On the basis of the purpose they serve

a) Revenue tariff: Generally low with a motive to raise revenue
through mass consumption


b) Protective tariff: Generally high with a view to protect domestic
industries from foreign competition.


c) Countervailing and Anti-Dumping Duties: imposed on those
imports subsidized by the foreign govt. Anti-dumping duties are
applied to imports which are being dumped on the domestic market
at a price either below their production cost or domestic prices. Both
are considered as penalty duties.


NON_Tariff Barriers
Non-tariff barriers (NTBs) include all the rules, regulations and bureaucratic
delays that help in keeping foreign goods out of the domestic markets. The
following are the different types of NTBs:

a) Quota
b) Embargo
c) Voluntary Export Restraints
d) Subsidies to local goods
e) Local content requirement
f) Technical barriers
g) Procurement policies
h) International price fixing
i) Exchange control
j) Direct and Indirect Restrictions on Foreign Investments
k) Customs Valuation
Explanation of different types of Non-Tariff Barriers
a) Quota: A quota is a limit on the number of units that can be imported or the
market share that can be held by foreign producers.


b) Embargo: When imports from a particular country are totally banned, it is
called an embargo. It is mostly put in place due to political reasons.


c) Voluntary Export Restraints: A country facing a persistent, huge trade deficit
against another country may pressurize it to adhere to a self-imposed limit on the
exports. This act of limiting exports is referred to as voluntary export restraint.


d) Subsidies to local goods: Governments may directly or indirectly subsidize
local production in an effort to make it more competitive in the domestic and
foreign markets. For example, tax benefits may be extended to a firm producing in
a certain part of the country to reduce regional imbalances


a)






Explanation of different types of Non-Tariff BarriersContinues
e) Local content requirement: A foreign company may find it more cost effective
or otherwise attractive to assemble its goods in the market in which it expects to
sell its product, rather than exporting the assembled product itself. In such a case,
the company may be forced to produce a minimum percentage of the value
added locally.


f) Technical barriers: Countries generally specify some quality standards to be
met by imported goods for various health, welfare and safety reasons. This facility
can be misused for blocking the import of certain goods from specific countries
by setting up of such standards, which deliberately exclude these products.


g) Procurement policies: Governments quite often follow the policy of procuring
their requirements (including that of government-owned companies) only from
local producers, or least extend some price advantage to them. This closes a big
prospective market to the foreign producers.














Explanation of different types of Non-Tariff BarriersContinues
h) International price fixing: Some commodities are produced by a limited number of
producers around the world. In such cases, these producers may come together to form a
cartel and limit the production or price of the commodity so as to protect their
profits.



i) Exchange control: Controlling the amount of foreign exchange available to residents for
purchasing foreign goods domestically or while travelling abroad is another way of restricting
imports.



j) Direct and Indirect Restrictions on Foreign Investments: A country may directly restrict
foreign investment to some specific sectors or up to
a certain percentage of equity. Indirect restrictions may come in the form of limits
on profits that can be repatriated or prohibition of payment of royalty to a foreign
parent company







Impact of Tariff..
Protective Effect: Import duty price of imports , thus decrease
imports and increase demand and price of domestic goods Thus,
domestic supply

Consumption Effect: Increase in prices for duty usually reduces the
consumption capacity of the people.

Redistribution Effect: Import duty increase demand and price of
domestic goods , it amounts to the redistribution of income between
the consumers and producers in favor of the producers.


Revenue Effect: Increased revenue due to tariff.

Impact of Tariff.. Continues..
Income and Employment Effect: Higher spending on domestic goods
cause an expansion of domestic income and employment.


Competitive Effect: Protection may enable domestic industries to
obtain monopoly power with all its associated evils.


Terms of Trade Effect: To maintain the level of imports to tariff
imposing country, if exporters reduces prices, then imports may
become cheaper than before. So TOT improves.
Balance of Payment Effect: Tariffs, by reducing the levels of imports,
may help the country to improve BOP position.



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