ibe bop barriers to trade

8/12/2019 IBE BOP Barriers to Trade

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INTERNATIONAL BUSINESS

MANAGEMENT

BARRIERS TO INTERNATIONAL TRADE

LECTURE 13

PROF SOUMITRA MOOKHERJEE


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BARRIERS TO TRADE: OVERVIEW

TYPES OF TRADE BARRIERS

Barriers to trade are developments that hinder, prohibit or limit trading activity .

There are mainly three types of trade barriers as stated below:

Cultural barriers la!"ua"e# $urre!$%# belie&s# 'alues# li&est%le# s%ste(s# et$)

Territ*rial Barriers Di&&i$ulties i! a$$essi!" re"i*!s +ue t* (*u!tai!s#ri'ers# et$)

E$*!*(i$ barriers ,*'er!(e!t re"ulati*!s a!+ -*li$% (easures t.at

restri$t# *r +is$*ura"e i!ter!ati*!al tra+e bet/ee! $*u!tries)

The economic Barriers to trade can be clubbed under two groupsA. Tariff Barriers

B. Non Tariff Barriers including quotas and regional emargos


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BARRIERS TO TRADE: TARIFF

BARRIERS

TYPES OF TARIFF BARRIERS

A tariff is a ta levied on goods imported from abroad and sometimes

referred to as custom duties.

!igh import duties and tariffs raises prices and prohibits trade volumes and

restricts imports. "t is the most used and most familiar type of trade restriction.

!igh levels of tariffs are occasionally levied by the government to encourage

purchase from local producers

The following types# patterns of tariffs may be introduced to discourage trade:

A. !igh Ad$valorem ta rates

B. !igh fied# specific duties

%. %omple valuation system for calculation of tariffs

&. %omple tariff classification and multiplicity of rates


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BARRIERS TO TRADE: TARIFF

BARRIERS

OT!ER E"A#P$ES OF TARIFF BARRIERS

$e%&ing s'ecial c(arges on goods imported which raises import prices and

encourages purchase from domestic players

S'ecial Administrati%e fees are charged and this adds to the rising cost of

imports

S'ecial su''lementar& and )ounter%ailing duties are levied on goods ( and

this is particularly so for commodities where price competition is severe. Also,

supplementary duties are levied to enhance the ta revenue collections

*ariale le%ies and Border ta+es are imposed and this is particularly visible inAsian countries ( all these additional levies results in imports becoming

epensive


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BARRIERS TO TRADE: NON TARIFF

BARRIERS

SPE)IFI) $I#ITATIONS TO TRADE

,uotas-

A *uota is a type of *uantitative barrier to trade ( where restrictions are

imposed on the amount of goods that can be imported.

+utting a *uota on a good creates a shortage, which causes the price of the

good to rise and maes the imported goods less attractive for buyers.

Im'ort $icensing requirements-

The need to obtain special licenses and special approval from the trade bodies#government, etc for importing goods from a particular region


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BARRIERS

SPE)IFI) $I#ITATIONS TO TRADE

Bu& $ocal )once't-

%ountries announce policy measures where they specify the proportion of

imports and local content of a product ( this is especially encouraged for

protecting local industries.

Emargos-

This is a development where the government declares rules and in fact is

stringent about prohibiting trade with another country.

Alternatively, governments may specify the trading blocs where trade is

permitted. !owever, with liberaliation ( these restrictions are being

somewhat eased.


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BARRIERS

Prescriing ,ualit& Standards-

0overnments also declare rules where goods if not meeting certain qualit&

standards are not given trade approvals. 0overnment may the deny the

acceptance of testing met(ods standards adopted by the trading partners.

e.g. &iscouraging child labour in "ndia

The governments and trade bodies also specify the 'ac/aging0 laeling0 and

mar/ing standards that are acceptable.

1o%ernment Partici'ation in Trade-

1o%ernment 'rocurement 'olicies ( where agencies lie T%, 4tate

Trading %orporation, etc are representing "ndia and procurement taes placemainly through government agencies.

E+'ort susidies are declared to mae eports highly competitive and if

subsidies are removed eport competiveness declines.


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COST OF BARRIERS TO TRADE

TRADE BARRIERS 2.. )OST

"mposition of Tariffs increases t(e 'rice of imported goods.

$ess com'etition and protection from world marets may lead to domestic

price inflation. Although, domestic producers stand protected $ the choice andinterests of consumers get diluted.

The ta on imported goods is passed on to the consumer and t(erefore t(e

'rice of im'orted goods is (ig(er.

The opportunity for trade induced in%estments and ca'acit& creations and

em'lo&mentprospects get limited)


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BARRIERS TO TRADE DIMINISHING

AR13#ENT IN FA*O3R OF FREE TRADE

7hen nations specialie and trade, total world out'ut and distriutionincreases.

%ompanies can produce for foreign as well as domestic marets and this

reduces t(eir o%er4de'endenc& on domestic mar/ets. 8ree trade allows to

diversify internationally when domestic maret opportunities are limited.

8ree trade leads to com'etition and larger %ariet& of goods are available (

thereby providing choice and convenience for consumers

+rices of goods tend to decrease through increased competition ( though this

impact may be negligible if global supply side shocs results in o%er4(eating ofcommodit& 'rices gloall&0.

The current global economic scenario is grim and 9ational leaders have

admitted that promoting 8ree Trade and %apital flows would bolster growth and

development.

ibe bop barriers to trade

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