Trade Barriers: The Other Side Of The Coin

By: Gaurav Batra In: Trade Last Updated: 2010-12-13

Trade Barriers is a term, which brings nightmares to traders, suppliers and businesses involved in the Exim activities. Especially today in the age, when free global trade is considered to be mandatory, it is necessary to recall the how these trade barriers work and especially how it affects an Exporter.

What are Trade Barriers? Trade barriers are common tools employed by governments of various countries to realize major economic targets such as:

Boosting domestic production
Protecting domestic workers and companies
Increasing revenues by imposing Exim duty
Significant reduction in consumption and reliance on Exports

These may be levied in the form of duties, taxes or other forms, but they all have only one aim i.e. regulation or imports and offering competitive advantage to domestic goods and businesses.

Types of Trade Barriers Trade Barriers are generally categorized in to three categories i.e. tariff, non-tariff and voluntary barriers. All these three types of barriers control and regulate international trade of a country.

Pros and Cons of Trade Barriers Like any other concept, even trade barriers have a positive and negative side to their operations. However debatable the concept be, no one can ignore their importance in Exim sector of any country's economy and its stand in the global market.

Advantages:

Earns Forex for the country.
Promotes protectionism giving advantage to home industries.
Ensures quantitative restrictions upon imports.
Earns revenue for the government.

Disadvantages:

Can hurt the national economy in the longer run.
Provide unnecessary shield to under-performing business units.
Hurts customers interests because of high price of good quality imported products.
Raises inflation.

These two sides of the same concept of trade barriers have made it one of the most debatable and controversial topics on the agenda of economists, businessmen as well as governmental agencies.