International trade barriers

by M Nazhif, A Nizam, and Arif Suhair

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INTERNATIONAL TRADE is the exchange of goods or services along international boundaries. The exchange of goods also affects the world economy as determined by supply and demand, making goods and services available that may not be available to consumers around the world. The Free Trade Agreement is an agreement between two or more countries to form a free trade area where trade in goods and services can be implemented with non-tariff barriers and minimum tariffs.

There is two type of trade barriers. First is the tariff. There are three types of tariff barriers. Rates can be in specific form, ad valorem or compound. Specific tariffs are fixed taxes calculated based on the quantity or volume of imported goods. Ad valorem rates are shaped like sales tax, expressed as a fixed percentage of total imports. Compound rates are the combination of specific rates and ad valorem rates.

And second is non-tariff barriers. The import quota is a physical restriction on the quantities of goods that can be imported at a time, usually a year. A selective import quota is also a specific quota applied for a selected country. The absolute quota is physical restrictions on quantities of goods that are allowed to be imported within a specific period of time, usually a year.

Dumping is a form of international price discrimination. It happens when overseas products are priced lower than the same local products with them, even with tariffs and transportation costs. When selling goods at lower prices than manufacturing costs in foreign markets, they are also considered dumping. Export subsidies are government assistance to export-oriented locals

The main purpose of these various obstacles is to protect important industries in a country because such industries are especially important during times of emergency and warfare. It is also to protect young industries such as automobile industry such as Perodua and Proton. These barriers can also be used as a source of income for a country.

The benefits gained from the implementation of this restriction is that it reduces the supply of imported goods and improves the competitiveness of local goods. Restrictions in this form of tariffs are also able to contribute to national income through import duty collection. Demand for local goods increased more because they were cheaper than prices for imported goods coupled with import duties and transportation costs. Implementation of these restrictions also helps in reducing the unemployment rate.

Distribution of resources and raw materials is more focused on industries that are covered only. Local consumers will have to pay higher prices for imported goods that have been added to the cost of transport and import duty. It also affects export earnings of a country and consequently affects income of labor. Local producers become less skilled in international markets because of lack of competitiveness.