Barriers To International Trade

By international trade we mean the exchange of goods and/or services. This exchange usually takes place between two parties from different countries or between two countries located anywhere on the globe.

If the international trade takes place between two parties, it is known as bilateral trade and if the trade takes place between more than two parties, it is known as multi-lateral trade.

There are basically three barriers to international trade that are used by countries, and they are as follows:

1. Non-tariff Barrier

Usually this type of barrier is imposed by a country on imports so that the quantity of imported items is restricted. Due to this, the availability of the imported item or items is restricted in the domestic market and the price too is very high.

2. Tariff Barrier

This is barrier is in the form of duties, taxes, quotas etc. Because of this barrier, imports decrease and price of imported products increase which results in the fall in the demand giving boost to domestic products.

3. Voluntary Constraint

This is a type of international trade barrier wherein a country voluntarily restricts or stops imports from coming in. This is usually used to limit the competition that domestic industries will face with the coming in of imported goods.

Whenever a country starts international trade with another country, these three barriers to international trade are always taken into account. It has been seen that lower developed countries and developing countries tend to favor these three barriers to international trade as the countries can earn foreign exchange by introducing tariff and non-tariff barrier.

The local industries are protected from competition by foreign companies and industries and as less imported goods are available in the country, consumers tend to buy local products giving the local industries a boost.