Domestic trade happens between two units in one country under the same political governance and directly influencing only one national market. On the other hand international trade happens between two units being under two different political systems, each controlling and caring for its own domestic trade, and directly influences both national markets. Trade between countries increases the variety of goods on local markets, lowers the prices on those products and gives chance for local companies to sell abroad. Those are the positive effects, but still as much as countries do not mind exporting, they do not like importing. Exporting of goods is connected to bigger inflow of money to the country and development of local industries. Imports mean money outflow, bigger variety of products on the market and, as a result, higher competition for domestic companies. It also might lead to a situation, when economical dependence might allow endangering political independence of a country, as it happens, for example, with Russia influencing other governments and their decisions by controlling the prices and flow of oil and gas they sell. Trade Barriers can be defined as: “Restrictions and obstacles impeding free international exchange of goods and services.”
II. WORLD TRADE ORGANIZATION AND GENERAL AGREEMENT ON TARIFFS AND TRADE GATT itself is not an organization, but a treaty with the signatories being contracting parties. Its objective is to achieve multipartite and free world-wide system of trading. The four basic principles of GATT are: 1. Member countries will consult each other concerning trade problems. 2. The agreement provides a framework for negotiations and embodies results of negotiations in a legal instrument. 3. Countries should protect domestic industries only through tariffs, when needed and permitted. There should be no other restrictive devices such as quotas prohibiting imports. 4. Trade should be conducted on a non-discriminatory basis.
Countries should cooperate and reduce the barriers mutually to ensure the growth and balance of trade. They should follow the principle of most favoured nation (MFN). It means that countries should treat one another as good as they treat their best trading partner or any other country. Any trade benefits or restrictions should be considered as extended to other MFN principle countries, and their results must be seen on corresponding scale. Exception from this principle is that an advanced country should not count on mutuality from less advanced countries. GATT was established only as a temporary body and that is why in 1995, during Uruguay Round, it was replaced with WTO. Continuing the activities of GATT and being more permanent as well as legally secure, WTO monitors trade, opens markets by international cooperation, provides forum for trade negotiations between members and resolves disputes. The WTO’s main goal is to promote a free market international trade system and is promoting it by: working to reduce tariffs, prohibiting import/export bans and quotas, eliminating discrimination against foreign products and services, and eliminating other impediments to trade, commonly known as nontariff barriers
III. CLASSIFICATION OF TRADE BARRIERS
Artificial trade barriers are restrictions put on international trade, created by government or, in case of private barriers, group of domestic companies sharing the same objectives of protecting groups’ business. Artificial barriers are divided into three subcategories: tariff, nontariff and private barriers. TARIFF BARRIERS
Tariff is a direct tax or customs duty on a products moving across. It is generally an easy and straightforward method for the country to administer. While being a barrier to trade, tariffs, are very transparent and so can be easily accounted for by companies during development of their marketing strategies. In modern international...
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