Effects of International Trade Barriers - Essay Example

ESSAY ON –TRADE BARRIERS In the past decades, the opening of the markets has boosted economic and trade growth worldwide. However, the trade barriers have remained a key obstacle to the access of markets. Researchers have pointed out that the potential benefit of reducing the obstacle is significant. The World Trade Organization (WTO) estimates that scrapping all the trade barriers would boost the global welfare by more than $170 billion annually (Markusen, 2004, p. 39). In some of the areas, this is equivalent to 2% of GDP. Additionally, countries engage in international trade for various reasons. First, international trade increases the choice of goods for the domestic consumers. It also allows the domestic market to export their goods. With all these benefits, free trade is not completely accepted by all the parties. There must be restrictions to regulate trade in different nations. In this view, the essay critically discusses why the government continues to impose barriers to trade and are frequently engaged in a trade dispute. First, it is paramount to understand the meaning of trade barrier before digging deeper into the subject of discussion. Trade barriers refer to the measures that the public authorities or the governments introduce so as to restrict or prevent overseas investment or trade. The measures of the restriction need to be takenin the form of a particular decision or legislation. The measures that are imposed may take the form of the current practice. When countries are important or exported from one country to another, they have to be accompanied by the correct documentation (Epps & Trebilcock, 2013, p. 70). Some of the barriers that the government employees include import quotas, licenses, specific tariffs, and customs duties. The imposition of the trade barriers varies from one country to another. Tariffs refer to the fixed fee levied on every unit of an imported good. The tariff varies in relation to the good that is important. For instance, a country may decide to levy $250 tariff on each computer that is imported and levy $10 tariff on each pair of trousers that is imported. There is also the ad Valorem Tariffs where the tariffis imposedaccording to the value of a good that is to be important (Schaffer, et al., 2015 , p. 54). For instance, a ValoremTariff could be 15% tariff levied by Japan of the U.S automobiles. The 15% will increase the value of the automobilethat will in turn protect the domestic producers from being undercut (Anderson, 2004 , p. 18). On the other hand, an import quota is a restriction that is placed on the amount of particular good that can be imported. The importation of tariffs affects the price of goods and services sold in a particular market. Prices without the influence of tariffs Source: Source WTO 2014 Figure 1 shows the prices of the products without the imposition of the tariffs. In the graph, DD stands for Domestic Demand while DS stands for Domestic Supply. At lower prices, the domestic consumers will be in a position to consume Qw worth goods. However, the home country can only produce Qd. Thus, there must be the importation of Qw-Qd of goods. Source: Source WTO 2014 Figure 2: shows the effects of the imposition of tariffs on the prices of goods and services. When the priceis increased, domestic companies are willing to produce the goods. The overall effects are that reductions in imports increase domestic production. As a result of the effects of globalization, trade restrictions have become increasingly significant. Due to international trade liberalization, trade obstacles such as import and tariff restrictions have been reduced significantly. Following the Second World War, the average industrial goods have been reduced from approximately 40 % to less than 5%. Nowadays, the restrictions are based on qualitative matters such as product packaging and product quality requirements for purposes of consumer protection (Egger, et al., 2015 , p. 42). The decision to for trade restriction is based on three main factors, which are customs duties, technical standard, regulation, and customs procedures. The primary reasons where the government imposes trade restrictions are discussed below. First, countries used trade barriers so as to protect the domestic employment. The increases in competition for the imported goods threatens the domestic industries. As a result, the companies may resolve to shift the production or cut the costs, which mean that there will be higher rates of unemployment (Hashimoto, 2014, p. 372 ). The unemployed complain about the domestic industries because of the poor working conditions, cheap foreign labor, and the lack of regulation may make the foreign companies produce goods more cheaply. In some of the situation, the companies may decide to produce goods until there is no longer a comparative advantage. The domestic market has to ensure that they provide their employees with good working conditions. Lack of trade restrictions attracts foreign investors who may bring in the stiff competition that affects the domestic industries (Anjaria, et al., 2005, p. 101). Furthermore, use of tariffs ensures that the infant industries are protected and can be seen by the Import Substitution Industrialization strategy which is employed by many developing nations. The government can levy tariffs on the imported goods if it wants to foster the growth of the domestic industries (Rolland, 2014 , p. 23). The increase of prices of the imported goods creates domestic market for the domestically produced goods. At the same time, it protects the infant industries from being forced out of the competitive pricing. Additionally, it decreases unemployment rates and allows the developing countries to shift from the agricultural products to the finished goods. However, there are critics of this strategy. They claim that if an infant company does not grow with the stiff competition they will produce low quality goods (Mayer, 2014, p. 94). Moreover, the use of tariffs is necessary so as to protect the consumers. The government may decide to levy tariffs on the products that they feel that they can endanger its citizens (Hanson, 2010, p. 42). For instance, South Korea may decide to place high tariffs on the imported beef from the United States of America if they think that the good could be tainted with a disease. The importation focuses on protecting the health and the livelihood of the citizens. Additionally, the country may decide to impose tariffs on the poor quality products from other countries so that they can be faced out in the country’s market. As a result, the consumers purchase the high-quality domestic products (López, et al., 2010, p. 91). National security is also another important factor that the nations consider. Tariffs are imposed to protect some of the companies that is deemed strategically important (Snow, 2015, p. 216). These are the companies that support national security. The defense industries are often viewed as vital to the state industries, and they must enjoy a significant level of protection. For instance, the United States of America and Western Europe a very protective defense-oriented companies. The companies have to be protected for the interest of the population. Additionally, countries may employ tariffs if they believe that the trading partners are not playing by the rules agreed in advance or the countries decide to go against the policy objectives (Barbour, 2010, p. 102 ). Further, the companies’ employees’ retaliation if a certain government goes against the government’s foreign policy objectives. Countries also set tariffs as a retaliation technique if they thing that a trading partner has not played his or her role (Cavusgil, et al., 2014, p. 57). For instance, if France thinks that the United States of America have allowed wine producers in its domestic market to call Champagne it may decide to levy tariffs on the imported meat from the United States of America. Additionally, if the United stated decides to crack down the improper labeling, France may stop its retaliation. The primary focus of retaliation is on the government policies. There is a need for trade barriers to protect the countries from dumping. In some of the situation, the imports are sold at below average cost. As a result, companies have to come up with antidumping duties to prevent dumping (Aaronson, 2006 , p. 29). In conclusion, adoption of free international trade may result in the collapse of the domestic markets. There is a need to protect the domestic market as discussed above to ensure that there is the sustainability of the domestic industries and encourage the innovation of ideas in the different countries. The trade barriers will reduce the trade disputes that may come up as a result of the poor working condition. The tariffs enable the government to increase revenues as imports enter the domestic market. The domestic market will also benefit as a result of the reduction in competition because the import prices are artificially inflated. The countries also need to protect their population from low-quality goods or counterfeits or goods that can harm their health. Bibliography Aaronson, S. A., 2006 . 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