Effects of Trade Barriers on Consumers
International trade offers a perfect platform for growth of the global economy. However, not every party participating in the trade enjoys mutual benefits of the trade. Some countries enjoy the benefits while others suffer exploitation. Since it is the responsibility of every country to protect its people from exploitation, it is important for governments to be wary of this exploitation and take appropriate action. Some of the actions that a country takes to protect its people and the consumers may include introduction of tariffs, limiting trade and devaluation of its currency. Such measures are trade barriers. The effects of trade barriers on consumers can be devastating. However, economists argue that these restrictions focus on safeguarding the interests of a country.
The effects of trade barriers on consumers
Trade barriers occur in different forms. A good example is quota. This refers to when a government sets a limit on its imports. In other words, a government regulates the quantities of imported products. A country may choose to implement a quota system because of various reasons. For example, the government could be after protecting local manufacturers. By restricting imports, demand for local products would go high, benefiting local manufacturers and promoting the economy.
Quotas also aim at protecting consumers. For example, if imported products, which are not of high quality, flood the market, consumers in that country get a raw deal when buying goods. The government may therefore move in and restrict importation of such products in order to safeguard the interests of its people. Other effects of trade barriers on consumers are prevention of flow of goods from manufacturers to the market and increased demand for the restricted commodities.
Understanding trade barriers in-depth
Not every country in the world likes free trade. In most cases, international trade partners impose restrictions, while putting the country’s interests ahead. Through trade barriers, consumers may get what they want or may not get certain products in the market because of government restrictions on imports.
A common trade barrier is tariff. In simple words, a tariff is tax, which a country levies on imports. In most cases, tariffs are good at protecting upcoming industries and developing economies. However, more advanced economies may use tariffs to pursue own interests. In either way, tariffs affect international trade since exporters prefer dealing countries with fair and minimal taxes. While the effects of trade barriers on consumers are real, here are common reasons why governments use tariffs:
Firstly, tariffs aim at protecting the local job market. Normally, excess imports cause stiff competition with locally produced products and may threaten domestic industries. In response, affected organizations may opt to lay off some of its workers because of low sales and revenues. This could lead to higher rates of unemployment, as people are rendered jobless.
Another reason why governments enact business tariffs is to protect consumers. A country may introduce or increase taxes on products, which it considers a threat to its people. This is common when the government has evidence or suspects that certain products are not fit for human consumption because of contamination on chemical composition. In this case, the government is acting to safeguard the interests of consumers and avert a possible crisis.
How to overcome the effects of trade barriers on consumers
Today, trade barriers are rife in most parts of the world. Some countries enact trade barriers for national security. Developed countries restrict businesses in order to protect specific industries that are important and support national security. A good example is defense industries, which hold state interests and enjoy massive protection.
In some cases, a country may impose trade barriers retaliation especially where it feels that the other trade partner has not played by the rules. Besides breaking the rules of engagement, trade barriers may come into play when a trading partner violates a country’s foreign policy. Thus, the effects of trade barriers on consumers largely stem from the relationship between trading parties.
Today, many governments use non-tariff barriers to restrict business operations. This is sometimes called the red tape. They come in various forms like legit licensing, exchange controls, local content requirements, foreign investment restrictions, etc. Such measures discourage investors because they are prohibitive.
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