Trade Restrictions
- This is a preview of the essay.
To view the full text you must login!
The countries usually restrict their trade, others more and others less. There are several methods and several reasons to restrict the trade, and the ideal situation is where the country has weighed up the marginal benefits against the marginal costs of altering them.
The different methods of restricting trade are the following:
Tariffs are probably the most used trade restrictions in the world, they are taxes imposed on either exports or imports. They are easy and cheap to collect and their effect on trade is protective, since they reduce foreign competition. Tariffs have also a revenue effect; they bring in money to the governments. The importance of tariffs is hereby bound with the level of industrialisation of the country: the more industrialised the country is the less important the amount of tariffs. Ad valorem tariff is a specific percentage laid upon the original price and specific tariff is a fixed amount of money/unit sold. Compound tariff is a combination of these two. There are also systems where countries can favour other ones: most favoured nation status, and generalised system of preferences. The first one guarantees no higher tariff to one country than any other and the latter is a system where an industrialised country can charge lower tariffs from certain developing countries...