Question

in a critical essay, evaluate trade barriers. Why do countries impose trade barriers? What is the effect of trade barriers on the trade balance, the employment, and the economic growth?

Now choose a country (other than Saudi Arabia) and evaluate the arguments for and against erecting trade barriers in your chosen country.

Answer 1

Ans)

Trade barriers

Trade barriers are government-induced restrictions on international trade, which generally decrease overall economic efficiency.

All countries are not that much rich or large that they can produce all the products resources etc and all the wants of there county by there own so the international trade is done for the purpose of elemimating scarse resources and importing variety of product and exporting what ever want the international trade is done by proper rules and regulations and is evaluated by the government and the trade unions trade must be legally privileged the country where the international trade has been done may have some hindrance intrade these are impose on the parties that may be taxes duties etc there hindrence in trade are known as trade barriers .

International trade enables countries to have access to products which they are unable to produce. For example, small nations in the Middle East have large deposits of oil. They have become very wealthy from those oil deposits. However, even with all that money, they don’t manufacture everything themselves. Instead, they exchange their oil for motor cars and airplanes which are built by countries like the United States, Japan, and Germany. These countries have little or no oil deposits of their own.

A Trade barriers cause a limited choice of products and, therefore, would force customers to pay higher prices and accept inferior quality.

B Trade barriers generally favor rich countries because these countries tend to set international trade policies and standards.

C Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, which can be explained by the theory of comparative advantage.

There some forms of trade barriers

1 Tariffs

2 Non-tariff barriers to trade

3 Import licenses

4 Export licenses

5 Import quotas

6 Subsidies

7 Voluntary Export Restraints

8 Local content requirements

9 Embargo

10 Currency devaluation

11 Trade restriction

Generally, governments impose barriers to protect domestic industry or to “punish” a trading partner. Trade barriers, such as taxes on food imports or subsidies for farmers in developed economies, lead to overproduction and dumping on world markets, thus lowering prices and hurting poor-country farmers.

Governments may opt to impose tariffs for a multitude of reasons, including the following goals:

1) To protect nascent industries

The country can impose the trade barriers to reduce the international trade to protect the national or insider trading.

2) To fortify national defense programs

The second goal of the the government to impose the tariff taxes and the barriers are to maintain the secrecy of the defence at the time of war and for the the safety and security of the country.

3) To support domestic employment opportunities

The government put restrictions on international trade if they want to improve the insider trade and the first preference or the opportunity give two to the the small business for the business which is done within the country.

4) To combat aggressive trade policies

If the trade is done aggressively and there is any misshappening on that good sometimes the taxes are imposed because of safety reasons and to avoid the aggressive trade.

5) To protect the environment

The government also impose the trade barriers to protect the environment from the harmful import and export of goods because if there is no import it will affect the economic growth and if there is no export the production process will increase so the utilisation of scarce resources will increase it will ultimately affect the environment .

* Impact of trade barriers on trade balance employment and economic growth

Trade barriers, such as tariffs, have been demonstrated to cause more economic harm than benefit; they raise prices and reduce availability of goods and services, thus resulting, on net, in lower income, reduced employment, and lower economic output

Impact on trade balance

Trade clearly results in positive economic outcomes, allowing people in different countries to specialize in what they do best, and then exchange physical goods, services, and financial assets across borders. But there are often misperceptions about the measurements that economists and policymakers use to track flows of trade.The balance-of-payments system consists of the current account, which measures the flow of goods and services, and the capital account, which records the flow of finances

The trade barriers can put current account (trade) deficit is simply another way of stating that we have a capital account surplus; neither has a causal implication for the health of the economy. Whether a business sells to or buys from domestic or foreign consumers, they do so because the trade is profitable. Production and exchange – regardless of the balance on the current account – generate wealth.

Impact on economic growth

Trade makes a nation wealthy, and conversely, trade restrictions make a nation poorerTrade enables nations to specialize in activities in which they have a comparative advantage; in other words, what they can produce at a relatively lower opportunity cost, and trade for what they would otherwise have to produce at a higher opportunity cost

Through this process, productivity increases as resources flow to the economic activities in which a country has a comparative advantage.This leads to employment gains where production is most efficient, though it can also lead to employment losses in sectors where production is comparatively less efficient—an outcome of which policymakers should remain cognizant. On net, though, trade results in higher levels of productivity, income, and output throughout the economy.

positive, long-term economic effects of trade – increased competition, innovation, productivity, employment, wages, and output – provide benefits that outweigh the short-term transition costs trade can cause. And vise versa.

Impact on employment

the trend toward globalization has been going on for decades, trade barriers steady loss of jobs for . While the economy does experience rises and falls in unemployment rates to save jobs in one industry is jobs sacrificed in other industries.did reduce the number of available jobs

International Trade Commission, in its study of barriers to trade, predicts that reducing trade barriers would not lead to an overall loss of jobs. Protectionism reshuffles jobs from industries without import protections to industries that are protected from imports, but it does not create more jobs.Moreover, the costs of saving jobs through protectionism can be very high.

Trade barriers in India

Any restriction imposed on the free flow of trade is a trade barrier. Trade barriers can either be tariff barriers (the levy of ordinary negotiated customs duties in accordance with Article II of the GATT) or non-tariff barriers, which are any trade barriers other than tariff barriers.

India has following trade barriers

Import Licensing

The most common non-tariff barrier is the prohibition or restriction of goods that are imposed through import licensing requirements. Certain products are subjected to licensing related trade barriers, although India has eliminated its import licensing requirements for most consumer goods

.Negative List

India maintains a ‘negative list’ of imported products that come under various forms of nontariff regulation

Entry Requirements

With respect to entry requirements, India has divided goods that are new, those goods that are secondhand, remanufactured, refurbished or reconditioned.

Testing, Labelling and Certification

The Indian Government has sorted out 109 commodities that that must be certified by the Bureau of Indian Standards (BIS) and the National Standards body. Apart from this, the Food Safety and Standards Authority of India, implemented under the Food Safety and Standards Act, 2006 laid down standards for articles of food and regulating the manufacturing, processing, distribution, sale and import of food. ..

Anti-dumping and Countervailing Measures

Anti-dumping and countervailing measures are executed by the WTO Agreements to protect the domestic industry from facing severe injury that is caused by dumped or subsidized imports

Export Subsidies and Domestic Support

Several export subsidies and other domestic support have been provided to various industries to make them globally competitive.

The impact of eracting trade barriers

Trade barriers cause a limited choice of products and, therefore, would force customers to pay higher prices and accept inferior quality. Trade barriers generally favor rich countries because these countries tend to set international trade policies and standards.