Restrictions to international trade - Business Environment

There are a number of things that governments do to restrict international trade.
These restrictions include:

  • Quotas A physical limitation on the import of certain goods into a country, sometimes by mutual agreement (e.g. voluntary export restraints).
  • Tariffs A tax placed on imported goods.
  • Exchange controls A limit to the amount of a currency that can be bought which will limit the import of goods.
  • Subsidies Payments made to domestic producers to reduce their costs and therefore make them more competitive on world markets. Qualitative controls Controls on the quality of goods rather than on quantity or price.

All of these serve to restrict international trade, and therefore reduce specialization on a world level. They invite retaliation and could lead to inefficiencies. Import controls have a wide effect on industry. The 200 per cent tariffs that the Americans threatened to impose on French cheeses and wines at the end of 1992 if the GATT talks were not successful, would have impacted on many other industries like the bottle-making industry or the insurance industry. But there are powerful arguments used in support of import controls. For example, they can be used to protect industries, whether these industries are ‘infant’ industries or strategic industries. In the 1999 debate within the EU on bananas, it was argued by the African, Caribbean and Pacific countries which receive preferential treatment in the EU for their bananas that the relaxation of these preferential terms might lead to the complete devastation of their economies. Import controls can also be used to improve the balance of payments position in the case where a deficit exists.

The United Kingdom is a member of a number of international organisations that serve to promote free trade and control the restrictions to free trade, like the World Trade Organisation.


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