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Home Commercial Policy Barriers to Foreign Trade


Barriers to Foreign/International Trade:


In order to shelter home industries, foreign/international trade has following barriers:


(i) Import and export prohibition. The government of a country by law may totally ban the import or export of certain commodities for reasons of health or for promoting the growth of certain industries in the country. For instance, when foot and mouth disease attacks cattle, the government totally prohibits the import of beef from that country.


(ii) Custom duties or tariff. Tariffs are the oldest form of protection. They are imposed on the import and export of commodities. When tariffs are imposed on the import of commodities, they discourage import and raise their prices to domestic consumers. When they are imposed on the export of commodities, they discourage exports and make the goods available for home producers. Tariffs or custom duties may be specific or ad-valoram. When a tariff is based on weight, quantity or other physical characteristic of imported goods, they are called specific. The duty is called ad-valoram when it is based on the value of the goods. Such a duty is fixed as percentage of the foreign or domestic valuation of imported goods.


(iii) Exchange control. Exchange control implies the government regulations relating to buying and selling of foreign exchange. Under the system of exchange control, all exporters are required to surrender their claims cm foreign exchange to the central bank of the country in exchange for domestic currency at the rate fixed by the government. The government then allots the foreign exchange among the licensed importers. Exchange control may be resorted for correcting an adverse balance of payments or for protecting home industry or for conserving foreign resources or for maintaining the exchange rate at a predetermined parity.


(iv) Quotas. In order to reduce imports, the government of a country may restrict the total imports of a given commodity to a specified amount or specify the maximum amount of a commodity which can be imported from each producing country. When the total amount of goods to be imported is determined, the government then issues licenses for their import This device Of restricting imports is applied as an alternative to custom duties.


(v) Preferential treatment. The government of a country may give preferential treatment in the rate of taxes to some of the countries. For instance, under the Commonwealth Preferential System exports have had referential treatment in U.K. Over goods from Non-Commonwealth countries. The granting of preferential treatment results in the formation of trade blocks. The countries which are not giving preferential treatment impose high tariffs in relation to the goods of the discriminating countries. The international trade is thus hindered.


(vi) Import monopolies. When the government of a country takes responsibility of importing all the commodities herself, we say the government has import monopolies.


(vii) Import licenses. Another barrier which restricts the import of goods from abroad is the import license If the government of a country allows the import of foreign commodities to the licensed importers, the trade is very much brought under control This method is adopted for curtailing imports and for the use of discrimination between goods and countries.

Relevant Articles:

What is Commercial Policy
Objectives of Modern Commercial Policy
Instruments of Commercial Policy
Theory of Free Trade
Barriers to Foreign/International Trade

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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