Barriers to International Trade

Barriers to international trade, also known as trade barriers, are government-imposed

restrictions, regulations, or policies that hinder the free flow of goods, services, and
capital across national borders. These barriers can have significant impacts on trade
volumes, economic growth, and the distribution of resources. Trade barriers can be
classified into two main categories: tariff barriers and non-tariff barriers.

1. Tariff Barriers
• Tariffs: Tariffs are taxes or duties imposed on imported goods at the border
when they enter a country. They increase the price of foreign goods, making
them less competitive compared to domestically produced goods. Tariffs are
used as a revenue source for governments, but they also protect domestic
industries from foreign competition.
• Import Quotas: Import quotas set a maximum limit on the quantity of specific
goods that can be imported during a certain period. These quotas are intended
to restrict the amount of foreign products entering the domestic market,
protecting domestic industries and sometimes safeguarding national security
interests.
• Export Tariffs and Quotas: Some countries impose tariffs or quotas on exports
to conserve resources, control inflation, or promote the availability of goods in
the domestic market. Export restrictions can lead to reduced supply and higher
prices in foreign markets.
• Voluntary Export Restraints (VERs): VERs are agreements between exporting
and importing countries that voluntarily limit the quantity of goods exported to
the importing country. They are often negotiated to avoid the imposition of
more stringent trade measures, such as tariffs.

2. Non-tariff Barriers:
• Licensing Requirements: Governments may require importers to obtain
licenses or permits to import certain goods. The licensing process can be
cumbersome and time-consuming, acting as a deterrent for foreign firms to
enter the market.
• Technical Barriers to Trade (TBT): TBTs refer to regulations and standards
related to product quality, safety, and labeling. While these standards are
essential for consumer protection, they can be used as disguised barriers to
protect domestic industries from foreign competition, especially if the
requirements favor local producers.
• Sanitary and Phytosanitary Measures (SPS): SPS measures are regulations
related to food safety and animal/plant health. While important for public
health and environmental protection, they can be used as trade barriers if they
are unnecessarily stringent or not based on scientific evidence.
 • Subsidies and Domestic Support: Governments may provide subsidies or
financial support to domestic industries, giving them a competitive advantage
over foreign competitors. Subsidies can distort international trade and lead to
overproduction and unfair competition.
• Currency Manipulation: Some countries deliberately manipulate their currency
exchange rates to gain an advantage in international trade. By devaluing their
currency, they make their exports cheaper in foreign markets and imports more
expensive in the domestic market.
• Trade Embargoes and Sanctions: Trade embargoes and sanctions are
imposed to restrict trade with specific countries for political, security, or human
rights reasons. These measures limit economic interactions and can have severe
implications for both the target country and the countries imposing the
restrictions.

Trade barriers are often a subject of international trade negotiations and disputes.
Organizations like the World Trade Organization (WTO) aim to promote free and fair
trade by addressing trade barriers and resolving trade disputes among member
countries. Reducing trade barriers can lead to increased global economic integration,
efficiency gains, and higher standards of living for many nations involved in
international trade.