International Trade

Jasmine Zhang

Economics and Personal Finance 9

Students will demonstrate knowledge of the global economy by...

Describing the costs and benefits of trade barriers

Different types of trade barriers

  • Tariffs
  • Non-tariff barriers to trade
  • Import licenses
  • Export licenses
  • Import quotas
  • Subsidies
  • Voluntary Export Restraints
  • Local content requirements
  • Embargo Currency devaluation
  • Trade restriction

The Costs of Trade Barriers

  • Trade barriers impose a cost on the traded goods, thus raising their prices.
  • Trade barriers are detrimental to trade, and reduce economic efficiency.
  • Free trade involves the removal of all such barriers.
  • Trade barriers affect underdeveloped and the developing countries more, because they face the highest barriers.
  • Trade barriers as taxes imposed on agricultural goods by the developed countries, reduce the amounts they import from the underdeveloped countries.
  • This leads to overproduction and lowering of prices of agricultural goods, hurting the farmers in the underdeveloped countries.
  • Tariffs affect the poor countries more since they are higher on labor-intensive goods, which these countries export.
  • Since trade barriers reduce imports, they thus reduce the consumption choices of the people in the country imposing the barriers.
  • Tariffs increase the prices of imported goods, thus reducing teh consumption choices of the people.
  • The tariff protected local industies take advantage of the tariff walls, and do not make any attemts at improving themselves.
  • They keep producing inferior goods and never become competitive.
  • As a result of this, domestic consumers pay higher prices for inferior goods.
  • Their consumption choices are also very limited.
  • Free trade will increase their consumption choices as well as reduce prices through increased international competition.
  • Trade barriers will do the reverse.

Benefits of Trade Barriers

  • Since a tariff is a tax, the government will earn revenue.
  • Domestic industries and producers benefit from the reduced competition.
  • They can still sell their inferior goods to the local people because the imports of better goods is reduced because of the tariff walls.
  • If domestic production is created by the import substitution industries, it will help in creating local income, employment and also output.

Describing the effects of international trade organization

Explaining the growing economic interdependence