What are trade barriers? Trade barriers are restrictions place on trade between nations by governments or public authorities. Their purpose is to make imported goods or services less competitive than locally produces goods and services (protect domestic industries – economic protectionism.The most common trade barriers are subsidies, tariffs, quotas, duties, and embargoes. The term free trade refers to the theoretical removal of all trade barriers, allowing for completely free and unfettered trade. In practice, however, no nation fully embraces free trade, as all nations utilize some assortment of trade barriers for their own benefit.
Types of Tariffs and Trade Barriers
There are several types of tariffs and barriers that a government can employ: * Specific tariffs
* Ad valorem tariffs
* Import quotas
* Voluntary export restraints
* Local content requirements
A fixed fee levied on one unit of an imported good is referred to as a specific tariff. This tariff can vary according to the type of good imported. For example, a country could levy a £10 tariff on each pair of shoes imported, but levy a £200 tariff on each computer imported.
Ad Valorem Tariffs
The phrase ad valorem is Latin for "according to value", and this type of tariff is levied on a good based on a percentage of that good's value. An example of an ad valorem tariff would be a 15% tariff levied by Japan on U.S. automobiles. This price increase protects domestic producers from being undercut, but also keeps prices artificially high for Japanese car shoppers.
Non-tariff barriers to trade include:
A license is granted to a business by the government, and allows the business to import a certain type of good into the country. For example, there could be a restriction on imported meat, and licenses would be granted to certain companies allowing them to act as importers. This creates a restriction on...
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