1. Overview

2. Impacts of trade barriers on business

3. Examples of free trade areas

4. Trade Between Countries
     United States of America   European Union   United Kingdom    Germany    China  

5. See also

6. Useful Databases on Trade Barriers

7. References

Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency; this can be explained by the theory of comparative advantage.

Most trade barriers work on the same principle: the imposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price or availability of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade war results. Barriers take the form of tariffs (which impose a financial burden on imports) and non-tariff barriers to trade (which uses other overt and covert means to restrict imports and occasionally exports).

In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel.

Overview

High income countries tend to have less trade barriers than middle income countries which, in turn, tend to have less trade barriers than low income countries.^[2] Small states tend to have lower trade barriers than large states.^[3][4][5] The most common trade barriers are on agricultural goods.^[2] Textiles, apparel and footwear are the manufactured goods which are most commonly protected by trade barriers.^[2] Tariffs have been declining in the last twenty years as the influence of the World Trade Organization has grown, but states have increased their use of non-tariff barriers.^[2]

According to Chad Bown and Meredith Crowley, world trade is "probably" vastly more liberal in current times than was the case historically.^[2] According to Ronald Findlay and Kevin H. O’Rourke, "for the nineteenth and twentieth centuries trade barriers and transport costs were the most important barriers to trade".^[6] They also write, "during the mercantilist era price gaps were as likely to be due to trade monopolies, pirates, and wars as to transport costs and tariffs, which are more easily quantifiable."^[6]

The barriers can take many forms, including the following:

• Tariffs
• Non-tariff barriers to trade include:
  • Import licenses
  • Export licenses
  • Import quotas
  • Subsidies
  • Voluntary Export Restraints
  • Local content requirements
  • Embargo
  • Currency devaluation^[8]
  • Trade restriction

Impacts of trade barriers on business

Trade barriers are often criticized for the effect they have on the developing world. Because rich-country players call most of the shots and set trade policies, goods such as crops that developing countries are best at producing still face high barriers. Trade barriers such as taxes on food imports or subsidies for farmers in developed economies lead to overproduction and dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs also tend to be anti-poor, with low rates for raw commodities and high rates for labor-intensive processed goods. The Commitment to Development Index measures the effect that rich country trade policies actually have on the developing world.

Trade barriers are mostly a combination of conformity and per-shipment requirements requested abroad, and weak inspection or certification procedures at home. The impact of trade barriers on companies and countries is highly uneven. One particular study showed that small firms are most affected (over 50%).^[9]

Another negative aspect of trade barriers is that they result in a limited choice of products and would therefore force customers to pay higher prices and accept inferior quality.^[10]

Trade barriers obstruct free trade. Before exporting or importing to other countries, firstly, they must be aware of restrictions that the government imposes on the trade. Subsequently, they need to make sure that they are not violating the restrictions by checking related regulations on tax or duty, and finally they probably need a license in order to ensure a smooth export or import business and reduce the risk of penalty or violation. Sometimes the situation becomes even more complicated with the changing of policy and restrictions of a country.

Examples of free trade areas

• North American Free Trade Agreement (NAFTA)
• South Asia Free Trade Agreement (SAFTA)
• European Free Trade Association
• Union of South American Nations
• New West Partnership (An internal free-trade zone in Canada between Alberta, British Columbia, and Saskatchewan)
• Gulf Cooperation Council common market

Trade Between Countries

United States of America

With the arrival of the Trump Administration, the U.S. has increasingly adopted tariff-based trade barriers. According to the Administration, these barriers are put in place to help domestic industries that it believes are exposed to unfair competition from imports. It also accuses some foreign countries, notably China, of applying non-tariff barriers to U.S. exporters, such as localization requirements that demand transfer of intellectual property. {{As of|2018}}, it is engaged in the 2018 China–United States trade war.

//European Union">European Union and the U.S.

The EU (collectively) is the United States' largest trading counter-party.

• data to be added

//United Kingdom">United Kingdom and the U.S

• U.K Exported 65,729 Million dollars worth of goods in 2016 to the U.S.^[11]
• U.S Exported 51,698 million dollars worth of goods in 2016 to the U.K.^[11]

//Mexico">Mexico and the U.S

• Mexico exported 32,045 million dollar's worth of goods to the U.S in 2016.^[11]
• U.S exported 24,569 million dollar's worth of goods to Mexico in 2016^[11]

European Union

The European Union (EU) is an association of 28 sovereign nations that have agreed to act as one in some spheres, notably trade. It operates the European Union Single Market for trade between themselves, with no tariff or non-tariff barriers. Trade with third countries is also managed collectively, through the European Union Customs Union. The EU operates few trade barriers,^[12]{{better source|this source is only about the US perspective. It does not (nor should it) take a worldwide perspective|date=December 2018}} the more significant of these are sanitary and phytosanitary standards and agricultural product quotas. The EU Binding Tariff Information System records applicable tariffs for external goods or services supplied to a member state. ^[13]

The European Customs Information Portal provides information to businesses in member states on export issues.

United Kingdom

United Kingdom and its top trade partners:

• The UK exported 14 billion euros to Ireland in 2011^[23]
• The UK exported 7 billion euros to China in 2011^[23]
• The UK exported 4.6 billion euros to India in 2011.^[23]
• The UK exported 3.8 billion Euros to Russia in 2011.^[15]

Germany

Germany is also a member of the EU. Germany's top trade partners are

• Germany exported 107 billion euros to the United States^[16]
• Germany exported 101 billion euros to France^[16]
• Germany exported 86 billion euros to the UK^[16]

China

China joined the WTO in 2001 and since then they have slowly loosened their trade laws. In 2004 they signed their Foreign Trade Law into effect. This made it so all types of businesses can trade globally as long as they have filed the right paperwork.^[17]

• China exported 276.8 billion dollars in goods to the U.S in 2017^[18]
• China exported 273.6 billion dollars in goods to Hong Kong in 2017^[18]
• China exported 56.1 billion dollars in goods to the Netherlands in 2017^[18]

See also

• Agricultural policy
• Customs union
• Denied trade screening
• End-use certificate
• Free trade
• International free trade agreement
• Region lock

Useful Databases on Trade Barriers

• ITC's Market'>Access Map, an online database of customs tariffs and market requirements
• ITC's Non-Tariff'>Measures Business Survey database, including regulatory and procedural obstacles that trading companies face both at home and abroad

References

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