International Trade: Barriers in Trading

Author: Dylan Sun

-Trading

Before discussing the barriers in international trade you should know about the model of trading. The model of trading revolves around a simple process of transfer of products, services or both. The transfer can take place between two parties, either belonging to the same country or of different countries. The transfer that involves two parties is called bilateral trade and if it involves more than two parties then the trade is called multi-lateral trade.

-International Trading

International trade is the transfer of products and services or both, which involve two or more parties of different companies in it. The two parties are called the importer and the exporter.

There are generally three types of barriers that are found in the importing/exporting or the international trade:

-Tariff Barriers

Tariff barriers are the barriers that are forced on the involving parties in the form of tax, quotas and custom duties. The tariff barriers reduce the amount of imports due to which there is a big rise in the rates of the imported goods and the demand in the international market decreases.

-Non-Tariff Barriers

Non-Tariff barriers are those barriers that are forced by limiting the quantity of the imported products. These barriers are forced by the government of the country. If the products are imported in fixed amounts the rates of those products increase because the supply of the foreign goods goes down.

-Voluntary Barriers

The voluntary barriers are those which are forced by the country, thereby halting the product to be imported from the country. These barriers allow the country to limit the imports in the country thereby decreasing the competition of the local products with the imported products.

These three barriers decide on the strategy to be followed in the international trade. These barriers have various advantages, some of which are discussed below:

Local market can be confined from the hard competition with the foreign market.

As there are less number of products that are allowed to be imported in the country, so there is a probability of success for the local products in the market.

The government can make more revenues as the currency remains with the country.