International trade faces various barriers designed to regulate and control the flow of goods and services across borders. One significant barrier is tariffs, which are taxes imposed on certain imports to make foreign goods more expensive compared to domestic products.
Barriers to
International Trade
By: Gurpreet Khurme
Currency Fluctuations
Are the changes in exchange rates of different currencies which affects trade as the buyer may have to pay more than they intended to.
A country that has a currency that is devalued compared another countries currency can export more goods or services so that the other country saves money. For example, it would cost us 1.50 CAD to buy 1 EURO, meaning in England our Canadian Dollar is only worth 0.67 EURO.
Excise Taxes
Are indirect taxes that are put on the sales of certain imported good or even domestic goods. Indirect meaning that the taxes are not paid directly by an individual consumer. Excise taxes are mostly imposed on goods such as cigarettes, gasoline and alcohol because they are considered unnecessary goods, so this helps raise their costs and reduce the amount of it that is used. In other cases, the excise taxes that are imposed on goods are used to help the government.
An example of excise tax could be the consumption taxes that are put on the imported crude oil. Or on tobacco, by raising the money, the government hopes that many individuals will not by it.
Tariffs
A tariff is a tax that is put on certain imports. This is to raise prices of imported goods comparative to domestic goods, to help decrease the amount of foreign imports. There are 2 forms of tariffs, a “unit” or specific tariff is when a tax is imposed as a fixed cost, an example of this would be having a tariff of $350.00 per 1 ton of imported steel. Another form of tariff is an “ad valorem” or a percentage of value based tariff, an example of this could be having a 16% tariff on imported cars.
FOR EXAMPLE: The cloth made in Britain is for $4.00 per roll, but then when it is shipped to the USA, each roll of cloth now costs $5.00 because a 25% tariff of $1.00 is added to the cost.
Standards
Is a trade barrier that is mostly in disguise, because it is to protect health, safety and product quality. But sometimes the standards can be very discriminatory and non reasonable.
An example of a standard would be forbidding imports that include plant products that may carry diseases or pests.
Embargoes
When a political agreement or the government puts in limits or blockades into the abilities of foreign countries to import or export goods.
For example, sometime back the United States of America had a trade embargo with Cuba, excluding some circumstances.
Landed Cost
The TOTAL cost once a shipment (an import) has arrived at the doorstep of the buyer. The cost includes the original price of the good, handling payment and fees, the insurance costs, the customs, tariffs, transportation fees, and more.
For example, an import to Australia would first, the cost of the original good, then the freight charges such as transportation costs, documentation and security charges, and lastly the destination charges such as the port charges, custom fees and insurance costs. When all this and more is added up, we get the landed cost.
Subsidies
Are sums of money that are granted to a domestic industry by the government, which helps make goods cheaper to produce in the domestic country compared to foreign countries. This helps lower the domestic price.
For example if the government grants some money to a wheat farm industry, this helps the farmers grow wheat on there farm and is cheaper for the country that getting the crop from another country and helps the farmer.
