ECONOMICS By Olekanma Doris

Different types of barriers the government may use to restrict trade Answer A tariff is either (1) a tax on imports or exports (an international trade tariff), or (2) a list of prices for such things as rail service, bus routes, and electrical usage (electrical tariff, etc.).[1] The meaning in (1) is now the more common meaning. The meaning in (2) is historically earlier. The meaning in (1) developed from a tabular list of tax rates for different import goods. Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures and countervailing duties, which, although called non-tariff barriers, have the effect of tariffs once they are enacted. Nontariff barriers to trade include import quotas, special licenses, unreasonable standards for the quality of goods, bureaucratic delays at customs, export restrictions, limiting the activities of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and phyto-sanitary measures, rules of origin, etc. Sometimes in this list they include macroeconomic measures affecting trade. Import license is a document issued by a national government authorizing the importation of certain goods into its territory. Import licenses are considered to be non-tariff barriers to trade when used as a way to discriminate against another country's goods in order to protect a domestic industry from foreign competition. Import quota is a limit on the quantity of a good that can be produced abroad and sold domestically.[1] It is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. If a quota is put on a good, less of it is imported. [2] Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy. A trade restriction is an artificial restriction on the trade of goods and/or services between two countries. It is the result of protectionism. However, the term is controversial because what one part may see as a trade restriction another may see as a way to protect consumers from inferior, harmful or dangerous products An embargo (from the Spanish embargo) is the partial or complete prohibition of commerce and trade with a particular country. Embargoes are considered strong diplomatic measures imposed in an effort, by the imposing country, to elicit a given national-interest result from the country on which it is imposed. Embargoes are similar to economic sanctions and are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war.[1] 2. The reason why government may impose trade barriers Answer To protect domestic jobs from cheap labor abroad. However, generally wages in industrialized countries are higher because their output per worker is higher. The high wages reflect higher productivity otherwise there is no comparative advantage and the owners should reduce wages to match productivity. To improve a trade deficit. A trade barrier make imports more expensive and decreases demand for imports. However, trade partners can do the same and increase prices for exports. This policy also doesnt necessarily fix the problem, if domestically produced goods arent competitive or might not be of good quality. Countries will also spend less on imports if their exports go down. To protect infant industries. Countries want to give newly developing industries time to grow and become competitive. However, in some cases the government protection never ends and these industries become competitive only because they have been given the benefit of the trade barrier. Protection from dumping. This is when imports are sold at below average cost. It is generally hard to prove and sometimes countries impose anti-dumping duties just to buy 1.

more time. 3. To provide more revenue- Governments gain extra revenue from tariffs (taxes on imports). The potential impact of trade barriers on consumers, employees and the economies of different countries Answer They decrease the amount of acceptable substitutes, and therefore support higher prices to consumers. Workers in manufacturing are motivated to seek trade barriers because they will negotiate wage increases from their employers when their employers show extra profitability from the protected market. Manufacturers are incentivized to seek more profit, and if they have to pay too much to workers either directly or in benefits, they will get their manufacturing done somewhere they can get cheaper workers that can still get the job done. And that is a source of both political populism and more protectionist sentiment from manufacturing workers. Increased Cost to Consumers Perhaps one of the most important disadvantages of trade restrictions is that it drives up the price of goods in a country where trade barriers artificially raise the price of imported products. The apparent effect of trade barriers is to prevent jobs from being lost to foreign competition, which is an argument used by many special interest groups to justify various types of trade barriers. In the long run, however, trade barriers force consumers to pay higher prices, since products that could otherwise be made cheaply overseas take more resources to produce domestically. Increased Costs to Domestic Suppliers Price hikes due to trade barriers don't just affect consumers. It also puts a strain on firms which supply raw goods and commodities to domestic industries. Without trade barriers in place, such firms can rely on the law of comparative advantage, meaning that it would cost them more to try to find a certain raw material in their own country than it would to buy from a country rich in a particular commodity. Trade barriers artificially raise prices on foreign commodities, making it less profitable to buy from other countries.

Less Competition- the fact that trade restrictions make it more costly to purchase goods from abroad results in the domestic industry facing less competition from foreign markets. In the short term, this can save jobs in select domestic industries. However, in the long run, it leads to customers having fewer choices in the products they buy. It also gives producers less incentive to create high-quality products available to the public. 4. Arguments against the use of trade barriers Answer Trade barriers despite their inept ability to aid the domestic and infant industries, it has been argued that in spite of this, the drastic use of trade barriers sometimes prove because of controversies between trading countries, thus leading to the invention of trade barriers to prevent and restrict the trade. Economists prove that most times this trade barriers most time brings about trade wars. Apart from that it also brings about an increase in prices of goods and services traded, thus leading to cases such as inefficiency iin the economy. Also, it makes consumers suffer by paying higher for the prices of traded goods. They decrease the amount of acceptable substitutes, and therefore support higher prices to consumers. Workers in manufacturing are motivated to seek trade barriers because they will negotiate wage increases from their employers when their employers show extra profitability from the protected market. Manufacturers are incentivized to seek more profit, and if they have to pay too much to workers either directly or in benefits, they will get their manufacturing done somewhere they can get cheaper workers that can still get the job done. And that is a source of both political populism and more protectionist sentiment from manufacturing workers.