Trade Barriers and Policies
Trade Barriers and Policies
Trade policies are set of rules and regulations that concern trade in every country. Each nation has their own policy when it comes to trade in which the country’s public officials are the ones who formulate such policies that they think to be the most appropriate for their nation. The purpose of these policies is to ensure that the country’s international trade will run smoothly through setting both clear goals and standards. In various regions, many groups of nations are working together so as to create a mutually beneficial rules and regulations. However, there are still trade barriers that are common in the global market, which will be analyzed in this study. Additionally, the promotion of the free trade policies of developed countries since 1950s will be discussed.
Trade Barriers are Common in Global Market
The government is imposing trade barriers so that they can control the flow of international goods and services. Imposing these barriers is common as they are part of rules and regulations in which the government has created.
One of the most common trade barriers is the tariff (econlib.org). Tariff is the tax for importing goods from other countries. This is also the reason that imported products’ price rises. Tariff is a common practice so that the importation of goods will be controlled and similar domestic products would still have contributions to the country’s Gross Domestic Product income. Additionally, if trade barriers will not be imposed, importation of goods might increase drastically and domestic products will be incompetent in terms of pricing.
Another common trade barrier is a subsidy from the government (econlib.org). Sometimes, he government is providing subsidy to some industry so that their products will be produced cheaper compare to foreign markets. As a result, imported goods become more expensive because of tariff and a lower price for domestically produced products. This practice is also common not only to reduce the importation of goods, but also to give way to domestic products in the market.
Trade barriers are common in the global market because it controls the importation of goods for the benefit of domestic producers. It also provides balance between domestic and international traders, which will be beneficial to the country’s economy.
Promotion of Trade Policies since 1950s
During the 1950s, developing countries were complaining about the trade barriers being imposed by well-developed nations, which affects their export industry. This event was led to the creation of a committee, which was the GATT or the General Agreement on Tariffs and Trade (twnside.org.sg). This committee was able to address the developing countries’ complaints against some trade barriers.
For the past five decades, there have been dramatic changes in free trade around the world (Martin, 2001). Many people realized the importance of trade in the global economy. 1950s is the start of world trade growth as well as the openness of the global economy. The rapid growth and the promotion of free trade reflect in factors such as the reduction of trade barriers, transport costs has also been reduced as well as the communication costs (Martin, 2001). These steps helped the free trade especially in the developing countries. In addition, they also used a variety of policy measures to apply their trade regulations. As an example, particularly in countries that export commodities, was to grant a monopoly to a specific firm.
Library Economics and Liberty (n.d.). Barriers to Trade, High School Economics Topics | Library of Economics and Liberty. Retrieved February 20, 2014, from http://www.econlib.org/library/Topics/HighSchool/BarrierstoTrade.html
Martin, W. (2001, October 9). Trade Policies, Developing Countries, and Globalization. Retrieved February 20, 2014, from http://siteresources.worldbank.org/INTPRRS/Resources/2866_trade_martin.pdf
TWN Third World Network (n.d.). TWN report for UNDP: Chapter 2 History and Evolution of the Trading System. Retrieved February 20, 2014, from http://www.twnside.org.sg/title/undp2.htm