Trade Barriers

Trade Barriers

Any hurdle, impediment or roadblock that hampers the smooth flow of goods and services, and payments from one destination to another. They are man-made obstacles to the free movement of goods between different countries. In spite of World Trade Organization, trade barriers exist.

tariff barriers
non-tariff barriers

2 types of trade barriers

Import Tariff
Transit Tariff
Export Tariff

Tariff Barriers

On the basis of origin and destination of the goods crossing national boundaries:

Import Tariff

are charged to generate revenue for the government and to protect local goods against the dominance of foreign products. (Example. Rice Tariffication Law, Safeguard Measures Act)

Transit Tariff

Tax imposed on a commodity when it crosses the national frontier between the originating country and the country to which it is cosigned to.

Export Tariff

A tax levied by the country of origin, on a commodity designated for use in other countries.

Specific Tariff
Ad Valorem Tariff
Compound Tariff

Tariff Barriers

On the basis of quantification of tariffs:

Specific Tariff

is a tax levied as a fixed charge for each unit of a good that is imported.

Ad Valorem Tariff

is Latin for "according to value" or "in proportion to the value" and this type of tariff is levied as a fixed percentage of the value of the commodity imported.

Compound Tariff

is a combination of an ad valorem and a specific tariff. It includes both a cost per unit, as well as a set percentage on the value of the good.

Revenue Tariff
Protective Tariff

Tariff Barriers

On the basis of the purpose it serves:

Revenue Tariff

It aims at collecting substantial revenue for the government. The tax is imposed on items of mass consumption, but the rate is low.

Protective Tariff

It aims at giving protection to home industries by restricting or eliminating competition. These are usually high so as to reduce imports.

Single Column Tariff

Tariff rates are fixed for various commodities and the same rates are made applicable to imports from all other countries. (Example. Preferential Trade Agreement (PTA))

Quota System
Voluntary Export Restraints
Embargo
Import License

What are the Non-tariff Barriers

Quota System

is a government-imposed trade restriction that limits the number of goods that a country can import or export during a particular period.

Voluntary Export Restraints

are arrangements between exporting and importing countries whereby an exporting country limits the number of goods of a particular nature that it can export to a specific country or region. Typically, a country imposes a voluntary export restraint at the request of an importing country that seeks protection for its domestic producers.

Embargo

are total bans of trade on specific commodities and may be imposed on imports or exports of specific goods that are supplied to or from specific countries.

Import License

can be defined as administrative procedures requiring the submission of an application or other documentation (other than those required for customs purposes) to the relevant administrative body as a prior condition for importation of goods.