Barriers to International Trade

Despite the many advantages of trade between nations trade barriers are often imposed on certain goods. You have already learned some general information about the means of controlling foreign trade (see Units 2-3). Here we shall dwell upon these issues in more details.

Two of the most important barriers to trade (import) are tariffs and quotas. A tariff is a duty, or tax, usually levied on imported goods. It is imposed to make imported goods more expensive compared to the domestic product. For this reason tariffs are usually very high and discourage the import of lower-priced foreign goods to the country.

Quotas are physical limits upon the amount of a good or a service, which can be imported or exported. Products limited by quotas may be subject to tariff as well. However quotas tend to increase prices even more than tariffs. Quotas are often used to restrict imports where tariffs seem to be not very effective because consumers are prepared to pay high prices for foreign commodities. Like protective tariffs quotas limit the amount of foreign competition a protected home industry is likely to face. For example, a quota may state that not more than X automobiles may be imported from a definite country in one year, thus protecting home automobile industry.

A specific type of quota that prohibits all trade is known as an embargo. It is a complete ban upon trade with a particular country. Like quotas embargos may be imposed on either imports or exports. Embargo is usually imposed for political reasons but also has an economic effect. The USA has maintained embargo on Cuban goods since 1959, when Castro took power in Cuba. This embargo severely damaged Cuban sugar industry and deprived American smokers of famous Havana cigars.

A boycott is a restriction against the purchase of goods from a particular country aimed at protecting domestic industries. Sometimes boycotts are used as a punitive measure to restrict both imports and exports between two countries

There are other devices that directly influence the flow of trade among nations. One of these is the export subsidy - a payment by a country to its exporters that enables them to sell their products abroad at a lower price than they could sell them for at home. Selling the same product for a lower price abroad than at home is called dumping. Such policy allows the exporters to penetrate foreign markets and face the competition while all their expenses are compensated by the government subsidies.

Still another tactic to restrict foreign trade can be classified as “administrative red tape”. This is the use of governmental rules and regulations to make it difficult to import goods from abroad. All countries have regulations about standards for products. They are aimed to protect health, safety and product quality. Occasionally product standards

can be deliberately designed to prevent imports.

Since the Second World War countries have attempted to abolish or at least to control restrictions on trade. One of the most important steps was signing the General Agreement on Tariffs and Trade in 1948. The primary goal of GATT was 1) to reduce protectionism that favours home producers over foreign producers and 2) to eliminate discrimination favouring one foreign producer over another. According to the principles of GATT protection should only be given through tariffs while such non-tariff

restrictions as import quotas or subsidies should be discouraged.

Documents Used in Foreign Trade

The most important documents used in foreign trade are the following:

1. Shipping documents that acknowledge the shipment (dispatch) or taking charge of the goods. They are usually documents of title to the goods, which means that the holder of the document is entitled to take possession of the goods. In general, these documents can also be sold or bought, that is to say they are negotiable.

The most important shipping document, especially in sea transport, is the Bill of Lading (B/L). The Bill of Lading is made out by the shipowner usually in sets of three originals with two copies. The originals are sent to the buyer by separate mails (airmail or surface mail), one remains with the sellers and one is given to the master of the ship. The B/L states the name of the ship carrying the goods, the port of embarkation and the port of destination and the rate of freight. It also gives the quantity, quality and value of the goods taken on board, specifying the marks and numbers on the packages. A B/L is said to be clean if the goods it refers to have been loaded in apparent good order and condition. If the packages are damaged in any way this will be marked on the bill, which in this case is called "dirty', or "foul" or "claused".

A Waybill is made out when the goods are carried by rail or road. It is usually prepared by the carrier and, in addition to the description of the goods and the names of the importer and the exporter, normally gives the conditions of the contract of carriage.

A Railway Consignment Note is a document used in international railway transport similar to the B/L, made out by the sender of the goods, handed to the carrier and signed by the person to whom the goods have been delivered, to prove that delivery has been made.

An Air Waybill or Air Consignment Note is used when the goods are transported by air freight.

2. Insurance documents. They must be effective from the day of shipment and usually must cover 110 per cent of the CIF value of the goods.

3. Invoices. These usually give the full description of the goods (quantity, quality and price), the name and address of the buyer and seller, the means of transport, etc.

The following types of invoices are used:

1. Commercial Invoice;

2. Consular Invoice, which is often required by the customs t< confirm the country of origin. It is certified by the consul of the importing country in the exporting country. It enables import duties to be correctly charged;

3. Customs Invoice.

4. Various certificates that may be needed for the importation of the goods. The most important ones are:

1. the Certificate of Origin, which states the Country from which the goods have originated. The identification of the true country of origin is necessary because tariffs may differ according to the countiy of oiigin.

2. the certificate of quality