Trade barriers can be defined as policies put in place by a government in order to place restrictions on trade internationally. When these barriers are in place, they can make trade expensive or difficult or they can prevent trade completely. When trade is expensive or difficult, the situation is referred to as trade tariffs, and when the trade is prevented completely, the situation is known as a trade embargo. Examples of trade barriers include; subsidies, quotas, non-tariff barriers and tariff barriers, embargo, and voluntary export restraint (VER). (Ferencz, J., & Gonzales, F,2019).
Countries impose trade barriers due to the following reasons:
To protect emerging industries; a government can impose tariff barriers on imported goods so as to support emerging industries in its country.
To protect the environment; governments may impose barriers on goods being imported that do not adhere to the environment, for example, hazardous commodities from the international market.
To battle aggressive trade policies; the government may impose trade barriers on international competitor’s goods who flood its market with their goods thereby removing local producers out of market.
To support employment opportunities for their citizens; government may use trade tariffs to discourage consumption of imports that compete with local produce thereby enhancing more consumption of locally produced goods hence promoting employment opportunities for its citizens.
To strengthen its defense; in a country there is a particular entity that provides goods essential to its national defense, therefore a government can impose trade barriers on such goods that can be imported in an attempt of encouraging its local segment in producing for the national defense.
Effects of trade barriers on:
This refers to the balance of imports and exports. Government policies that impose restrictions on both imports and exports affects their relative prices thus making trade of such goods more or less striking to import or export. For example, raising import prices on goods reduces their demand. (Carter,2020).
The government may impose barriers on products being produced in its country which are used as inputs in industries of other countries. This raises production costs on such products hence raising their prices. This also affects product sales since it projected to go down. Lower sales lead to lower employment. (Reyes,2020).
Countries that do not have restrictions on international trade tend to have faster growth in the economy, more opportunities for their people, more innovations, and offering more affordable goods and services to consumers. The vice versa also applies. (Irwin,2019)
Case study: Turkey
The Turkish government has placed restrictions on various sectors despite having a customs union (CU) with the EU. the pharmaceutical and agricultural sectors are placed under trade barriers. Turkey placed restrictions on imports of some agricultural goods so as to protect its local wine market. These agricultural products are inputs in the production of wine which it uses for exports. It also places restrictions on the prices of pharmaceutical goods in Spain, France, Greece, Portugal and Italy. Pricing of such goods is done based on the lowest prices in these countries. This is done so as to localize innovative pharmaceutical products in the Turkish market. This in turn offers more opportunities in innovation and employment to Turkish citizens.
Turkey, on the other hand, is affected by these barriers negatively, for example, these barriers reduce competition of import and export goods in turkey thereby lowering its economic output and affecting its trade balance. Turkish citizens are limited to open employment opportunities in countries that have faced restrictions from Turkey. Goods such as wine produced in Turkey also face penetration in open markets in countries such as the US where Turkey has imposed trade barriers.
In conclusion, trade barriers can be seen to have both negative and positive effects on a country’s ability to trade in the international market. Positive effects can be attributed to the protection of infants’ industries, protection on the environment, creation of employment and strengthening of national defense. A country that imposes these restrictions and enjoy its benefits is seen to also suffer from these restrictions. For example, it can be faced by the challenge of lower economic growth, fewer employment opportunities for its citizens as seen in the case of turkey and a trade imbalance of its imports and exports.
Carter, D. B., & Poast, P. (2020). Barriers to Trade: How Border Walls Affect Trade Relations. International Organization, 74(1), 165-185.
Dincer, N. N., & Tekin‐Koru, A. (2020). The effect of border barriers to services trade on goods trade. The World Economy, 43(8), 2093-2118.
Ferencz, J., & Gonzales, F. (2019). Barriers to trade in digitally enabled services in the G20.
Habiyaremye, A., & Avsar, V. (2020). Bilateral trade agreements and trade finance: evidence from Turkey. International Journal of Emerging Markets.
Irwin, D. A. (2019). Does Trade Reform Promote Economic Growth? A Review of Recent Evidence (No. w25927). National Bureau of Economic Research.
Heroles, R., Traiberman, S., & Van Leemput, E. (2020). Emerging Markets and the New Geography of Trade: The Effects of Rising Trade Barriers.
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