What are trade barriers?

Trade barriers are economic measures that make the exchange of goods and services more difficult. In particular, trade between two different economies is inhibited. A distinction is made between tariff and non-tariff trade barriers.

This lesson covers the barriers to trade. You will get to know the meaning of trade barriers and we will show you how tariff and non-tariff barriers to trade differ. Finally, you will find out which points speak in favor of trade barriers. To deepen your knowledge, you can answer a few exercise questions after the text.

  • Synonym: trade barriers
  • English: barriers to trade

What is the significance of trade barriers?

With the introduction of trade barriers, an economy (an individual state or a community of states) takes measures to make domestic market access more difficult for foreign providers of goods and services.

According to topbbacolleges, trade barriers are often based on a state’s protectionist attitude. By discriminating against market providers from abroad, domestic providers are to be strengthened. The goal of the state is to get its own economy going again.

Example

The European Union has facilitated the exchange of goods and services for its member states. Limits and tariffs have fallen. If a company outside the European Union wants to exchange goods or services with a European country, it must comply with international customs regulations.

The tariff barriers to trade

The tariff barriers to trade include the following measures:

  • Duties
  • Establishing minimum prices
  • Export subsidies

Duties

A duty is identical to a tax that is levied on goods produced abroad and sold domestically. The tax is paid by the foreign entrepreneur and the domestic consumer if the goods are imported into Germany. The state generates an additional source of income through the survey.

Minimum prices

Minimum prices are set by a state if price stability is to be ensured. The determination of the minimum prices can relate to a product or a range of products.

Export subsidies

If the state introduces export subsidies for certain products, it would like to support the export of these products. A domestic company benefits from this measure if it has to incur excessive production costs in order to sell the goods abroad. This measure is associated with high costs for the state.

trade barriers

The non-tariff barriers to trade

All quantitative restrictions on the import and export of services are summarized under the non-tariff trade barriers. Non-tariff trade barriers also include subsidies and trade barriers of a technical nature.

The non-tariff barriers to trade include B.:

  • Import quota
  • Export self-restraint
  • subsidy
  • Administration regulations
  • Currency manipulation

Import quota

With the import quota, the state determines the amount for a product that is to be manufactured abroad and sold domestically. The limitation of the supply leads to an increase in the price. Domestic suppliers are thereby strengthened because they can offer their goods at a cheaper price.

Export self-restraint

The export self-restraint is comparable to the import quota. Here , the foreign supplier undertakes not to exceed a certain amount when importing his products. In contrast to the import quota, the export self-restriction is on a voluntary basis.

Subsidy

The state strengthens its own economy by subsidizing domestic providers. Subsidies work better than z. B. Customs duties, as they are not immediately apparent to foreign providers.

Nevertheless, the state has to accept one disadvantage: the imposition of tariffs creates an additional source of income. Subsidies – e.g. B. Tax breaks – cost the state money.

Administration regulations

A state can stipulate certain administrative regulations that providers from other countries must meet in particular. If this results in excessive costs for foreign market participants, competitiveness with domestic providers is limited.

Currency manipulation

Trade barriers can also be achieved with currency manipulation. If their own currency is artificially influenced, foreign exporters have to set higher prices for their goods. This influences competition with domestic companies.
The prerequisite for this measure is that the country can pursue an independent monetary policy. For a country in the European Union, it is therefore impossible to keep foreign providers out of their own market through currency manipulation.

What are the arguments in favor of trade barriers?

Trade barriers restrict international free trade. Nevertheless, there are arguments in favor of introducing trade barriers.

A state wants to save domestic jobs. If the domestic companies are in competition with foreign companies, they are forced to sell their products at a lower price. Non-competitive companies produce less. It is not uncommon for this to result in staff being laid off.

Another argument in favor of trade barriers is that the state wants to protect domestic competition so as not to endanger national security. This position can e.g. B. be represented in the arms sector.

 

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