What is a trade barrier? Definition and examples
Trade barriers are government-imposed restraints on trade with other nations.
Trade barriers make international trade more difficult and expensive. They are typically implemented to protect domestic producers.
Trade barriers take the form of either tariffs or non-tariff barriers to trade.
Cambridge Dictionary defines a trade barrier as: “Something such as an import tax or a limit on the amount of goods that can be imported that makes international trade more difficult or expensive”
Tariffs are taxes or duties that are levied on imported goods. The aim of tariffs are to either raise the prices of imported products to at least the level of current domestic prices, or increase revenue for the government.
According to the World Trade Organization (WTO): “Customs duties on merchandise imports are called tariffs. Tariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments.”
In the video embedded below CNBC’s Uptin Saiidi explains how increased tariffs can impact an economy:
Non-tariff barriers to trade
According to the Southern African Development Community (SADC), “a Non-Tariff Barrier is any obstacle to international trade that is not an import or export duty. They may take the form of import quotas, subsidies, customs delays, technical barriers, or other systems preventing or impeding trade.”
Non-tariff barriers to trade include:
- subsidies – money given by a government directly to domestic companies, farmers, organizations and other entities to encourage production, increase exports, and protect domestic businesses.
- embargo – an official ban on trade with a particular country.
- import licenses – a permit authorizing the importation of a specified quantity of certain goods during a specified period.
- export licenses – grants an exporter the right to export a specific quantity of a commodity to a specified country.
- import quotas – a limit on the quantity of a good that can be imported into a country during a specified period.
- currency devaluation – devaluation can help a country’s export competitiveness and also make imports more expensive for consumers.
The video embedded below provides detailed information on ten examples of non-tariff barriers:
When a nation imposes trade barriers on other countries there is a risk that the affected countries will retaliate with their own trade barriers. This can lead to what is known as a trade war.