Tariffs/restrictions in foreign trade. - SS1 Commerce Lesson Note

Tariffs

Tariffs are taxes imposed on imported goods. When a country levies a tariff, it increases the price of the imported product, making it more expensive for consumers. The purpose of tariffs is to make foreign goods less competitive compared to domestic goods, thereby protecting domestic industries from foreign competition. Tariffs can be specific (a fixed amount per unit) or ad valorem (a percentage of the product's value). The revenue generated from tariffs may be used to support domestic industries, infrastructure, or other government initiatives.

Import Quotas

Import quotas restrict the quantity of specific goods that can be imported into a country. These limitations aim to control the volume of imports and safeguard domestic industries. By setting quotas, governments limit foreign competition and protect domestic producers from being overwhelmed by foreign goods. Import quotas can be expressed as a specific quantity or a percentage of domestic demand. Once the quota is reached, further imports of the restricted product are prohibited or subject to higher tariffs.

Embargoes and Trade Sanctions

Embargoes and trade sanctions are restrictions imposed on trade with specific countries or regions for political, economic, or security reasons. These measures can include a complete ban on imports or exports, as well as limitations on financial transactions and investment. Embargoes and trade sanctions are usually implemented to express disapproval of a country's actions or to influence its behavior by limiting its access to international trade.

Non-Tariff Barriers

Non-tariff barriers are diverse measures other than tariffs that can impede foreign trade. These barriers can include quotas, licensing requirements, technical standards, product testing and certification, customs procedures, and administrative hurdles. Non-tariff barriers aim to protect domestic industries, ensure product safety and quality, and regulate the entry of goods into a country. However, they can also be used as protectionist measures to create obstacles for foreign competitors.

Trade Agreements

Trade agreements are bilateral or multilateral agreements between countries that aim to reduce or eliminate tariffs and other trade restrictions. These agreements promote free trade by creating preferential conditions for participating countries. Through trade agreements, countries agree to lower or eliminate tariffs on certain goods and establish rules for fair competition and dispute resolution.