Question

Illustrate at least 3 ways tariffs and non-tariffs barriers work and under what circumstances they might be applied in the country India

Answer 1

Trade barriers

Trade barriers are the barriers that prevent your business in succeeding in terms of exports. These are of two types.

Nontariff Barrier-

A nontariff barrier is a way to restrict trade using trade barriers in a form other than a tariff. Nontariff barriers include quotas, sanctions, and levies. As part of their political or economic strategy, large developed countries frequently use nontariff barriers to control the amount of trade they do with other countries.

Nontariff barriers are generally used in international trade and any barrier to international trade will influence the economy because it limits the functions of market trading. The lost revenue resulting from the barrier to trade is called an economic loss. Such barriers often release countries from paying added tax on imported goods.

Tariff barrier-

A barrier to trade between countries which takes the form of abnormally high taxes levied by a government on imports or occasionally exports for purposes of protection, support of the balance of payments, or the raising of revenue of the country.

How these barriers work and when they can be implemented in a country like India-

1. To safeguard the domestic producers from foreign competition. It was clear that the domestic producers have to face a tough competition with the entry of foreign goods.

2. There was a fear that the economically strong countries would try to establish economic colonialism India through free trade.

3. Free trade economy would be a threat to society and culture as an entry of foreign goods and items would make people more westernized in outlook and appearance.

4. The Indian government wanted to establish a different standard of the economy which would be socialistic and look for welfare, not a capitalist economy looking for profit and business.

Example:

• Indian govt. has put a tax on import of Chinese toys.
• There have been imposed excise duties, custom duties, tax, etc. on other commodities too.