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.
