Tariff and non-tariff barriers
Tariff Barriers
Tariffs are taxes that are put in place
not only to protect infant industries at home, but also to prevent unemployment
because of shut down of domestic industries. This leads to unrest among the
masses and an unhappy electorate which is not a favourable thing for any
government. Secondly, tariffs provide a source of revenue to the government
though consumers are denied their right to enjoy goods at a cheaper price.
There are specific tariffs that are a onetime tax levied on goods. This is
different for goods in different categories. There are Ad Valorem tariffs that
are a ploy to keep imported goods pricier. This is done to protect domestic
producers of similar products.
Non Tariff Barriers
Placing tariff barriers are not enough
to protect domestic industries, countries resort to non tariff barriers that
prevent foreign goods from coming inside the country. One of these non tariff
barriers is the creation of licenses. Companies are granted licenses so that they
can import goods and services. But enough restrictions are imposed on new
entrants so that there is less competition and very few companies actually are
able to import goods in certain categories. This keeps the amount of goods
imported under check and thus protects domestic producers.
Import Quotas is another trick used by
countries to place a barrier to the entry of foreign goods in certain
categories. This allows a government to set a limit on the amount of goods
imported in a particular category. As soon as this limit is crossed, no
importer can import further quantities of the goods.
Non tariff barriers are sometimes
retaliatory in nature as when a country is antagonistic to a particular country
and does not wish to allow goods from that country to be imported. There are
instances where restrictions are placed on flimsy grounds such as when western
countries cite reasons of human rights or child labour on goods imported from
third world countries. They also place barriers to trade citing environmental
reasons.