Trade barrier

Commerce

The trade barrier is a measure or restriction imposed by the government of a country. This, to reduce or eliminate the exchange of goods and / or services with other nation (s).

Specifically, what a trade barrier does is increase the cost or definitively prohibit foreign transactions. For example, a tax can be placed on the importation of apples from Chile. In this way, it will be more expensive for the importer to buy Chilean apples.

Trade barriers can be considered protectionist measures. Thus, the idea is to favor local producers from foreign competition.

Characteristics of trade barriers

Among the characteristics of trade barriers are:

  • They apply to products and / sectors considered sensitive. This happens mainly in the agricultural sector.
  • Under the nascent industry argument, these restrictions are usually applied in certain markets. In theory, such measures should be temporary, until domestic producers have achieved economies of scale. That is, when reaching a certain volume of production, local companies should develop their activities efficiently to be able to deal with foreign competition.
  • In the absence of foreign competition, prices tend to be higher, hurting consumers.
  • If it is about taxes (such as tariffs), trade barriers generate an income to the treasury.
  • They can be applied in retaliation, in response to protectionist measures taken by another country.

Types of trade barriers

There are mainly two types of trade barriers

  • Tariffs: Tariffs are imposed on imports or exports and can be of two types:
    • Ad valorem: The tax is a percentage of the value of the goods. That is, it is calculated based on the amount of the sale.
    • Specific: It is calculated on a quantity or volume of a product.
    • Mixed: Composed of an ad valorem tariff and a specific one.
    • Antidumping: It is applied on foreign products that, when receiving a subsidy from the Government, for example, can be sold below their cost of production, giving rise to a case of unfair competition.
    • Income: It is applied only to collect taxes because the country does not produce the imported good internally.
  • Non-tariff: These are those that do not correspond to tariffs and can be of different types:
    • Import quotas: The government defines a limit on the quantity of a product imported, including by country. Above the maximum tax, a very high rate can be established that makes the transaction economically unviable.
    • Phytosanitary measures: Strict procedures and laws are imposed for the importation of certain products, mainly food, under the support of health care. It may be, for example, that a maximum is required in the use of pesticides.
    • Exchange control: It consists of restricting the availability of the currency necessary to carry out a transaction. For example, a different exchange rate can be set for each product or merchandise that you want to import or export.
Trade policy

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