Liberalization of Import-Export System

What is Liberalization of Import-Export System?

Liberalization of Import-Export System also known as Trade Liberalization stands for liberating
the import-export activity and securing a free flow of goods and services across borders. It is also the
removal or reduction of restrictions or barriers on the free exchange of goods between nations. These
barriers include tariffs, such as duties and surcharges, and nontariff barriers, such as licensing rules and
quotas. Economists often view the easing or eradication of these restrictions as steps to promote free
trade.

Trade liberalization is a controversial topic. Critics of trade liberalization claim that the policy
can cost jobs because cheaper goods will flood the nation's domestic market. Critics also suggest that
the goods can be of inferior quality and less safe than competing domestic products that may have
undergone more rigorous safety and quality checks.

Proponents of trade liberalization, however, claim that it ultimately lowers consumer costs,
increases efficiency, and fosters economic growth. Protectionism, the opposite of trade liberalization, is
characterized by strict barriers and market regulation. The outcome of trade liberalization and the
resulting integration among countries is known as globalization.

Advantages and Disadvantages of Trade Liberalization

Trade liberalization promotes free trade, which allows countries to trade goods without

regulatory barriers or their associated costs. This reduced regulation decreases costs for countries that
trade with other nations and may, ultimately, result in lower consumer prices because imports are
subject to lower fees and competition is likely to increase. 

Increased competition from abroad because of trade liberalization creates an incentive for
greater efficiency and cheaper production by domestic firms. This competition might also spur a country
to shift resources to industries in which it may have a competitive advantage. For example, trade
liberalization has encouraged the United Kingdom to concentrate on its service sector rather than
manufacturing.

However, trade liberalization can negatively affect certain businesses within a nation because of

greater competition from foreign producers and may result in less local support for those industries.
There may also be a financial and social risk if products or raw materials come from countries with lower
environmental standards.

Trade liberalization can pose a threat to developing nations or economies because they are

forced to compete in the same market as stronger economies or nations. This challenge can stifle
established local industries or result in the failure of newly developed industries there.

Countries with advanced education systems tend to adapt rapidly to a free-trade economy

because they have a labor market that can adjust to changing demands and production facilities that
can shift their focus to more in-demand goods. Countries with lower educational standards may struggle
to adapt to a changing economic environment.

Issues

 Negatively affect certain businesses within a nation.

 Poses a threat to developing nations or economies.
 Countries with lower educational standards may struggle to adapt to a changing economic
environment.

What can be done to alleviate the mentioned issues?

Strong Offerings

Any successful plan for international trade must start with a high-quality, unique product.
Copying what is already available on the market will prevent newcomers from carving out space, as
existing players and domestic manufacturers overseas have the advantage of being incumbents. The
right product makes a massive difference when it comes to trade opportunities abroad.

Market Opportunity

Building a global strategy means conducting extensive market research. Small businesses should
be ready to do their homework: this means deeply diving into the nuances of the market opportunity
under consideration, sizing up international and domestic competitors, assessing product demand, and
developing the unique business proposition that makes it worthwhile to build an international
operation.

Supply Chain Logistics

Supply chain considerations, such as management and logistics, take on increased importance
when entering global trade. Whether you’re exporting goods directly from Canada or instructing
overseas manufacturers to deliver goods to new geographic locales, you’ll have to build a robust supply
chain with as few weaknesses as possible. Ensure that your current partners can support steady
shipments to international clients and outposts. Failure to do so may create significant issues when filing
early orders as your business begins to gain traction in its new location.

How can trade liberalization be improved?

 By reducing tariffs.
 Reducing/eliminating quotas and;
 Reducing non-tariff barriers.

KEY TAKEAWAYS

 Trade liberalization removes or reduces barriers to trade among countries, such as tariffs and
quotas.
 Having fewer barriers to trade reduces the cost of goods sold in importing countries.
 Trade liberalization can benefit stronger economies but put weaker ones at a greater
disadvantage.
References

8 Important Features of Globalisation – Explained! (2013, January 17). World’s Largest Collection of
Essays! Published by Experts. https://www.shareyouressays.com/knowledge/8-important-features-of-
globalisation-explained/112458

Trade Liberalization: Definition, How It Works, and Example. (2022). Investopedia.

https://www.investopedia.com/terms/t/trade-liberalization.asp

Wallstreetmojo Editorial Team. (2022, April 3). Trade Liberalization. WallStreetMojo.

https://www.wallstreetmojo.com/trade-liberalization/#:~:text=It%20benefits%20countries%20in
%20different,capital%2C%20environmental%20damages%2C%20etc.