Trade Barriers:

Under this section we discuss methods used to protect international trade. We will discuss three main methods.

(a) Tariffs: These are taxes imposed on traded commodities as they cross national boarders. These are two main types of tariffs. An import tariff is a duty on an imported commodity.

Export tariff is a duty on an exported commodity.

Tariffs may be specific, and valorem or compound (a combination of an ad valorem and specific tariff). The effect of a tariff on imports depends on its size and the elasticity of demand for the imported commodity. If demand for the imports is elastic, a tariff imposed will reduce imports by switching demand towards the domestically produced substitutes. Conversely, if demand for imports is price inelastic, the main effect of the tariff will be on import prices rather than on the quantity of imports.

(b) Domestic Subsidies: These may be provided in many forms to avoid dumping. They are subsidies provided to certain domestic industries as a means of protecting them from lower priced foreign goods. These subsidies reduce the prices of the domestic products and make them more price- competitive.

(c) Quotas: They are quantitative restrictions (non tariff restrictions) on the imports and exports. They restrict the amount of commodities allowed to be imported or exported. It may also involve total ban of some products from being imported into the country.

Other forms of non-tariff barriers are voluntary export restrain (VER), technical, administrative and other regulations (these include safety regulation, health regulation, packaging, labelling requirement etc).