International Trade – Tariffs or Restrictions to Trade

Tariffs are taxes or duties imposed on imports and exports by the government of a country. The idea behind tariffs is to restrict the volume of trade or improve the international terms of trade. Tariffs are imposed to protect infant industries from undue competition with foreign firms, to generate revenue for the country-many countries derive their revenue from import and export duties. Also tariffs are imposed to prevent dumping of goods from foreign countries, hence leading to very low sale prices when compared to home prices.

That’s not all, tariffs help to correct unfavorable balance of payments by discouraging massive imports; prevent dangerous or harmful goods from other countries; encourage the establishment of local industries or enhance the expansion and growth of existing ones so as to provide job opportunities; serve as discriminatory measure against unfriendly countries; imposed on imported goods to enable a country be self sufficient in production of numerous goods and to check consumption pattern as citizens may develop uncontrolled appetite for foreign goods, can be used in most cases to protect certain strategic industries.

Tools or instruments of trade restriction

1. Import duties or tariffs: This is a tax imposed on imported goods to reduce the amount of trade.

2. Foreign exchange control: Trade can be controlled by reducing the foreign exchange available for trade transactions.

3. Devaluation: By lowering the value of a country’s currency vis-a-vis others, importation becomes costly while export becomes cheaper.

4. Embargo: This is the prohibition or outright ban placed on some imported goods

5. Import monopoly: This refers to a situation in which the government of a country takes over the importation of certain goods which are only essential to the country.

6. Import quota: Import quota restricts imports by imposing a limit on the quantity of goods but can be imported at a particular country.

7. Preferential duties: In order to either encourage or discourage the importation of certain goods from certain countries, discriminate duties are charged on these goods.

8. Excise duties reduction: This method helps to reduce the prices of locally made goods so as to enable people to patronize them instead of foreign made goods.

8. Import licence: Import licence is a permit that allows an importer to bring a certain quantity of foreign goods into a country and allows him to purchase the foreign currency required to pay for them.

Tariffs and restrictions are very essential to check-mate international trade to suit the developments and interests of a particular nation.