chapter 6 2e_jb

8/12/2019 Chapter 6 2e_JB

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Chapter 6

Barriers to

internationaltrade


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Lecture overview

Introduction

Barriers to international trade

a continuing debate

Macro level barriers to international trade Tariff barriers

Non-tariff barriers

Micro level barriers to international trade


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Learning outcomes

Understand the various trade opportunities that

exist among countries

Understand why there are trade barriers in a

growing open free market Explain the importance for countries to protect

their domestic products and their countries market

mechanism and macro needs

Explain why many different kinds of trade barriersare in existence today despite the WTOs efforts to

bring about a more liberalised international trading

environment


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Learning outcomes

Discuss the fundamental difference between

tariff and non-tariff barriers to trade

Describe the two main ways of applying a tariff

Give brief explanations of each of the types of

tariff and non-tariff barriers Discuss some of the regulatory measures that

can act as barriers to trade

Offer an opinion as to when each of the

regulatory measures might be justified

Give examples of company level barriers to

international trade


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Free trade versus restricted trade: an

ongoing debate

Why the pure free trade model is not feasible

Why the WTO and others advocate less restrictedinternational trade

Why all governments impose trade barriers to a

greater or lesser extent

How much restriction/ intervention is prudent ornecessary.


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Macro level barriers to international trade

Tariff barriers

International trade interventions involving the use of tariffs to

influence the price / appeal of imported or exported goods

A tariff is a schedule or list of duties (taxes) imposed on

imported or exported goods

Non-tariff barriers

A range of non-tariff related deterrents/ obstacles to

international trade activity.


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Types of tariff barrier

Import tariffs (most common)

Mainly used to protect local producers against

foreign competition Also used to generaterevenue for poorer countries

Export tariffs

Mainly used to discourage / limit the export of

particular products.


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Advantages of protectionism

Helps developing countries in their

industrialisation efforts

Preserves jobs in labour intensive and / or

sensitive industries

Generates additional revenue for governments incountries with poor tax collection systems


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Disadvantages of protectionism

Tends to encourage inefficiency at industry level

and discourages innovation

Makes imported manufacturing inputs more

costly which can affect producers price

competitiveness

Makes imported goods more expensive for the

consumer (especially the poor).


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How tariffs are applied

Ad valorem tariff

= fixed % of the customs value of a traded item

E.g. 10% of R2 000 = R200 customs duty

Specific tariff

= fixed monetary amount per unit of a trade item

E.g. R100 per R2 000 product = R100 customs duty


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Types of non-tariff barriers

Those which are deliberately imposed:

Import quota

Limits the number of units or total value of a

particular product that can be imported

Export quotaLimits the number of units or total value of a

particular product that can be exported


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Types of non-tariff barriers

Embargos

Completely prohibits the import or export of

a particular product

Buy-local legislation

Limits the purchase and / or use of foreign

products in particular categories


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Types of non-tariff barrier (continued)

Anti-dumping duties and countervailing

duties

Applied to dumped goods to bring prices

back to fair, market-related levels.Countervailing duties are applied where

dumping is the result of subsidisation

Safeguard measures

Imposed temporarily to remove competitive

threat of unexpected, cheaper imports


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Regulatory matters

Regulations to ensure every industry would be at

minimum be compliant with the macro goals of the

country

Standards (health, safety, environment)

Specify minimum levels of acceptable quality in the

composition or performance of specific products

Environmental regulations

Measures designed to reduce the degradation of air,

land, and water systems in the country


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Mining challenges and water protection

Requirements imposes regarding the use of these

resources

Foreign exchange controls

Limit the number and/ or value of transactions

involving foreign exchange

Rules of origin

Criteria by which the country of origin of a product

(inputs + degree of processing) can be determined


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Those which are not deliberately imposed:

Bureaucracy

Lack of institutional capacity

Bribery and corruption

Unfavourable geographical/ climatic

conditions in and en route to foreign markets.


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Knowledge and skills constraints

A shortage of sufficiently knowledgeable,

experienced and capable people to perform currenttasks and drive new initiatives

Capacity constraints

Insufficient human resources, technical andmanagerial talent, and experience in an organisation

which leads to slow output / sub-standard

performance


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Time constraints

A common problem faced by business peopletoday which can lead to production deficiencies,

communication problems and stress

Financial constraintsA shortage of funds or difficulty of accessing

capital to pursue a business venture.


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Prevalence of different trade barriers

amongst different country groupsCategory of trade barrier Most commonly associated with:

First Worldcountries ?

Least developedcountries ?

South Africa ?

Tariffs Yes Yes Yes

Quotas Yes

Embargoes Yes

Buy-local legislation Yes

Anti-dumping / countervailing duties Yes

Safeguard measures Yes

Standards (health, quality, environment) Yes Yes

Foreign exchange controls Yes Yes

Customs controls / procedures Yes Yes Yes

Rules of origin Yes Yes Yes

Bureaucracy Yes Yes

Lack of institutional capacity Yes Yes

Bribery and corruption Yes Yes

Unfavourable geographic conditions Yes

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