Trade barriers are restrictions placed by governments on international trade. They are harmful to the world economy and decrease overall economic efficiency. The theory of comparative advantage suggests that trade barriers are counterproductive to a global economy. This is why governments should seek to reduce or eliminate trade barriers whenever possible. However, removing all trade barriers is not an easy task.
Tariffs are one form of trade barrier. These are paid by domestic consumers and raise the relative price of imported goods. Other forms of trade barriers include quotas, licenses, and standardization. Generally, the tariff is placed on products imported from other countries and paid to the customs authority of the country imposing it.
Trade barriers may be justified on non-economic grounds. For example, countries may need certain raw materials for war, but cannot import them because the foreign supply is not reliable. If trade restrictions were lifted, then the US would no longer have to import such materials. This would make domestic production more affordable, which would benefit domestic producers.
Trade barriers are generally placed to protect the domestic economy. In most cases, they decrease the volume of imported goods and services. These barriers usually come in the form of taxes or tariffs, and they generally benefit national interests, governments, and domestic producers. However, they are not a panacea. If you are concerned that your business will suffer due to trade barriers, it is best to discuss the issue with your government. It is important to know the reasons for a trade barrier, so that you can remove it as soon as possible.
The government has a number of ways to reduce trade barriers. The Ministry of Foreign Affairs coordinates international trade issues, and the Ministry of Economic Affairs and Employment is responsible for single-market issues. This agency will negotiate with foreign governments and discuss the issue with companies. It may also help companies resolve trade barriers by partnering with other departments.
Trade barriers also raise prices, reduce availability, and decrease economic output. These costs are passed onto domestic consumers through higher prices. This means that economic output and employment are lower. Therefore, trade barriers are counterproductive and do not help the economy at all. The world has evolved away from protectionist trade policies since World War II.
The best way to remove trade barriers is to open the economy to the outside world. No country has ever been successful in achieving economic success without opening its markets. For example, East Asia has achieved economic success largely due to its trade opening. In the past twenty years, average import tariffs in the region have declined from 30 percent to less than 10 percent.
Eliminating trade barriers could generate gains of $250 billion to $680 billion a year. About two-thirds of these gains would accrue to industrialized countries, and the rest to developing countries. This would be about twice the amount that developing countries currently receive in aid. Moreover, developing countries would benefit more from global trade liberalization as a percentage of their GDP.