{"id":158,"date":"2014-09-04T17:54:11","date_gmt":"2014-09-04T17:54:11","guid":{"rendered":"https:\/\/courses.candelalearning.com\/internationalbusiness1xmaster\/?post_type=chapter&p=158"},"modified":"2015-02-17T20:06:38","modified_gmt":"2015-02-17T20:06:38","slug":"reading-international-trade-barriers","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-fmcc-internationalbusiness\/chapter\/reading-international-trade-barriers\/","title":{"raw":"Reading: International Trade Barriers","rendered":"Reading: International Trade Barriers"},"content":{"raw":"
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Trade barriers are government-induced restrictions on international trade, which generally decrease overall economic efficiency.<\/h2>\r\n<\/div>\r\n
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KEY\u00a0points<\/h3>\r\n
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  • Trade barriers cause a limited choice of products and, therefore, would force customers to pay higher\u00a0prices\u00a0and accept inferior quality.<\/li>\r\n\t
  • Trade barriers generally favor rich countries because these countries tend to set international trade policies and\u00a0standards.<\/li>\r\n\t
  • Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, which can be explained by the theory of comparative advantage.<\/li>\r\n<\/ul>\r\n<\/div>\r\n<\/section><\/div>\r\n<\/div>\r\n<\/div>\r\n
    <\/div>\r\n
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    \r\n\r\nTerms<\/strong>\r\n
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    • Tariff:\u00a0 <\/em>A system of government-imposed duties levied on imported or exported\u00a0goods; a list of such duties, or the duties themselves.<\/li>\r\n\t
    • Quota:\u00a0 <\/em>A restriction on the\u00a0import\u00a0of something to a specific quantity.<\/li>\r\n<\/ul>\r\n
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      Examples<\/strong><\/h4>\r\n<\/div>\r\n<\/div>\r\n
      \r\n\r\nTrade barriers are government-induced restrictions on international trade. Man-made trade barriers come in several forms, including:\r\n
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      • Tariffs<\/li>\r\n\t
      • Non-tariff\u00a0barriers to trade<\/li>\r\n\t
      • Import\u00a0licenses<\/li>\r\n\t
      • Export\u00a0licenses<\/li>\r\n\t
      • Import quotas<\/li>\r\n\t
      • Subsidies<\/li>\r\n\t
      • Voluntary Export Restraints<\/li>\r\n\t
      • Local content requirements<\/li>\r\n\t
      • Embargo<\/li>\r\n\t
      • Currency\u00a0devaluation<\/li>\r\n\t
      • Trade restriction<\/li>\r\n<\/ul>\r\nMost trade barriers work on the same principle\u2013the imposition of some sort of cost on trade that raises the price of the traded\u00a0products. If two or more nations repeatedly use trade barriers against each other, then a\u00a0trade war\u00a0results.\r\n\r\nEconomists 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\u00a0agriculture\u00a0and steel. Trade barriers are often criticized for the effect they have on the\u00a0developing\u00a0world. Because rich-country players set trade policies, goods, such as agricultural products that developing countries are best at producing, face high barriers. Trade barriers, such as taxes on food imports or subsidies for farmers in developed economies,\u00a0lead\u00a0to overproduction and dumping on world\u00a0markets, 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 to Development Index 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, therefore, would force customers to pay higher prices and accept inferior quality.\r\n\r\nIn general, for a given level of protection, quota-like restrictions carry a greater potential for reducing welfare than do tariffs. Tariffs, quotas, and non-tariff barriers lead too few of the\u00a0economy's resources being used to produce tradeable goods. An export subsidy can also be used to give an advantage to a domestic producer over a foreign producer. Export subsidies tend to have a particularly strong negative effect because in addition to distorting\u00a0resource\u00a0allocation, they reduce the economy's terms of trade. In contrast to tariffs, export subsidies lead to an over allocation of the economy's resources to the production of tradeable goods.\r\n\r\n
        \"\"\r\n
        Singapore<\/div>\r\n
        The Port of Singapore is one of the busiest in the world because Singapore must import most of its foodstuffs and consumer goods.<\/figcaption><\/figure>
        <\/figure><\/div>\r\n
        <\/div>\r\n<\/div>\r\nInternational trade barriers can take many forms for any number of reasons. Generally, governments impose barriers to protect domestic\u00a0industry\u00a0or to \"punish\" a trading partner.\r\n
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        <\/h3>\r\n
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        GLOSSARY<\/h3>\r\n
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        \r\n\r\nAgriculture<\/strong>\r\n\r\nThe art or science of cultivating the ground, including the harvesting of crops, and the rearing and management of livestock; tillage; husbandry; farming.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nComparative advantage<\/strong>\r\n\r\nThe ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.\u00a0The concept that a certain good can be produced more efficiently than others due to a number of factors, including productive skills, climate, natural resource availability, and so forth.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nCurrency<\/strong>\r\n\r\nMoney or other items used to facilitate transactions.\u00a0In economics, currency is a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply.\u00a0Paper money.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nDeveloping<\/strong>\r\n\r\nOf a country: becoming economically more mature or advanced; becoming industrialized.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nEconomy<\/strong>\r\n\r\nCollective focus of the study of money, currency and trade, and the efficient use of resources. The system of production and distribution and consumption. The overall measure of a currency system; as the national economy.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nEfficiency<\/strong>\r\n\r\nThe extent to which a resource, such as electricity, is used for the intended purpose; the ratio of useful work to energy expended.\u00a0The extent to which time is well used for the intended task. Improved efficiency was a principle goal of progressives, one they thought attainable by the application of scientific and rational thought to social problems.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nExport<\/strong>\r\n\r\nThis term export is derived from the conceptual meaning to ship the goods and services out of the port of a country.\u00a0To sell (goods) to a foreign country. Any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nFree trade<\/strong>\r\n\r\nFree trade is a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports) or quotas.\u00a0International trade free from government interference, especially trade free from tariffs or duties on imports.international trade free from government interference, especially trade free from tariffs or duties on imports\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nGood<\/strong>\r\n\r\nAn object produced for market.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nImport<\/strong>\r\n\r\nSomething brought in from an exterior source, especially for sale or trade.\u00a0To bring (something) in from a foreign country, especially for sale or trade.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nIndustry<\/strong>\r\n\r\nThe sector of the economy consisting of large-scale enterprises.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nLead<\/strong>\r\n\r\nPotential opportunity for a sale or transaction, a potential customer.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nLicense<\/strong>\r\n\r\nThe legal terms under which a person is allowed to use a product.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nMarket<\/strong>\r\n\r\nA group of potential customers for one's product.\u00a0One of the many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nPotential<\/strong>\r\n\r\nCurrently unrealized ability. A curve describing the situation where the difference in the potential energies of an object in two different positions depends only on those positions.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nPrice<\/strong>\r\n\r\nThe price is the amount a customer pays for the product.\u00a0The quantity of payment or compensation given by one party to another in return for goods or services.\u00a0The cost required to gain possession of something.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nProduct<\/strong>\r\n\r\nAny tangible or intangible good or service that is a result of a process and that is intended for delivery to a customer or end user. Anything, either tangible or intangible, offered by the firm as a solution to the needs and wants of the consumer; something that is profitable or potentially profitable; goods or a service that meets the requirements of the various governing offices or society.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nResource<\/strong>\r\n\r\nSomething that one uses to achieve an objective. An example of a resource could be a raw material or an employee.\u00a0Something that one uses to achieve an objective, e.g. raw materials or personnel.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nResource allocation<\/strong>\r\n\r\nResource allocation is used to assign the available resources in an economic way. It is part of resource management. In project management, resource allocation is the scheduling of activities and the resources required by those activities while taking into consideration both the resource availability and the project time.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nSecurity<\/strong>\r\n\r\nThe condition of not being threatened, especially physically, psychologically, emotionally, or financially.\u00a0proof of ownership of stocks, bonds, or other investment instruments.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nStandard<\/strong>\r\n\r\nSomething used as a measure for comparative evaluations. A level of quality or attainment.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nTrade war<\/strong>\r\n\r\nThe practice of nations creating mutual tariffs or similar barriers to trade.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section><\/div>\r\n<\/div>\r\n
        <\/div>","rendered":"
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        \n

        Trade barriers are government-induced restrictions on international trade, which generally decrease overall economic efficiency.<\/h2>\n<\/div>\n
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        KEY\u00a0points<\/h3>\n
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