International Trade BarriersEach country formulates its own foreign trade policy. The policy contains measures for protecting domestic industries and the economy from the activities of foreign companies.The Govt. of each country uses protective measures which serve as manmade barriers to foreign trade. They are known as International Trade barriers

TYPES OF TRADE BARRIERS

Tariff barriersTariffs refers to the taxes and duties imposed on imports of goods and services in a country. In India custom duty is a tariff that is levied on the import of several products. The purpose of imposing tariff are :to protect the domestic industry by increasing the cost of imported goods.Tariffs generate revenue for the importing country governmentBusiness for the small and medium industries is also protectedJobs in the domestic country are savedTo discourage import from a particular countryTo curb import for particular goods

AVERAGE TARIFF RATE ON MANUFACTURED PRODUCTS

Country19902011USA4.83.9UK5.93.9France5.93.9Germany5.93.9Italy5.93.9Japan5.33.9

*TYPES OF TARIFFSTARIFFSSpecificTariffValoremTariff*

Specific tariffs: It is levied as a fixed charge for each unit of the product imported. For example, a tariff of Rs.10,000 per ton of cement imported

Valorem tariffs: It is levied as a % of the value of the product. For example imposition of 20% tax on the value of computers imported.

TYPES OF NON-TARIFF BARRIERSQuantitative RestrictionsExchange controlsSubsidiesTechnical BarriersAdministrative RegulationsAntidumping policies

QUANTITATIVE RESTRICTIONS

Quantitative restrictions are imposed to restrict the quantity of import-export to a specific amount. It is of two types: a) Import Quotab) Voluntary Export Restraint (VER)

Import Quotas are quantitative restriction on the import of a particular good. It limits the amount of a product that can be imported over a specified time period. It is a direct restriction on the quantity of import.

Voluntary export restraints (VER) are agreements between two governments in which the government of the exporting country agrees to restrain the volume of its own exports. It is the opposite form of import quotas

EXCHANGE CONTROLSCentral banks or government agencies regulate the buying and selling of currency to shape foreign exchange in accordance with national policy.All foreign exchange transactions are routed through the Govt. or the specified authorityGovt. may reject to provide foreign currency to importer to reduce the import.Govt. may fix different exchange rates for different currencies. For example when the dollar sterling rate is 2 Dollar per British Pound the rupee may be fixed at 40 per dollar & 90 per pound.

Subsidies are any financial contribution or concession provided by the government agency to encourage the domestic production or export of the country.

It may be given in many indirect forms:a) Duty Drawbackb) priority for Raw Materialc) Finance Facilities at lower interestd) Tax concessions for exporterse) Grant for market survey, R&Df) supply of inputs at concessional rates

SUBSIDIES

TECHNICAL BARRIERSIt includes quality standards, health and safety regulation, packing and labeling requirement and technical standardsA country sets standards for the imported goods to protect its citizens against hazardous and substandard products.The regulation that the product must be tested & certified only in the importing country increase cost and time delays for exporters.

A large barrier that still exists today among automobile manufactures is that of Safety StandardsFor example, in the United states, protection for passengers NOT wearing seatbelts is a safety standard, while in Europe it is notAlso, Side turn signals are required in the US but not in Europe.So, Popular European vehicles not legal in USDifferences in US and European safety regulations inhibiting trade

This is not as easy as it seems however. Due to the United States strict safety and emissions standards, many gas-friendly vehicles popular in Europe are not available in the US.Safety regulations as simple as the color of turning signals and crash-dummy test positioning have hindered the importation of many vehiclesThis problem has consistently been evident, where Automakers, governments, and the insurance industry have each been vying for better and different safety standards, which has been hampering the goal of an internationally accepted standard.

ADMINISTRATIVE REGULATIONS

Govt. use several formal and informal policies and measures to restrict imports and boost exports.Administrative regulations are bureaucratic rules and procedures which make it difficult for enterprises to enter into country.These regulations may be in the following forms:a) Long and complicated forms to fill in.b) Delay in custom clearancec) Complicated and expensive import licensing procedured) need of samples for obtaining import license.

ANTIDUMPING POLICIESIn the context of IB, dumping is defined as selling goods in a foreign market at below their cost of production or at below their fair market value.Dumping is a method by which business firms unload excess production in foreign market.Most countries have antidumping policies to punish foreign enterprises that engage in dumping.If a domestic producer believes that a foreign firm is dumping in India, it can file a petition with the govt.In case complaint is right, the Govt. may impose antidumping duties on the products of that foreign firm.