Barriers to International Trade

Despite the many advantages of trade between nations, trade barriers are often imposed on certain goods. Two of the most important import barriers are quotas and tariffs.

A tariff is a duty, or tax, on imports. It may be imposed in order to make them more expensive compared to the domestic product, to discourage foreign producer from shipping certain goods into the country. The main purpose of tariffs is to keep out lower-priced foreign goods. For this reason tariffs usually are very high and this makes domestic manufacturer compete easier with imported product.

Quotas are physical limits upon the amount of good or a service, which can be imported. They 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. For example, a quota may state that not more than 100000 automobiles may be imported from South Korea in one year or X tones of coffee from Brazil. So, quota is a restriction on quantity.

An embargo is a complete ban upon trade with a particular country. It is usually imposed for political reasons. In 1952 Senator Joseph McCarthy persuaded the US Senate to impose embargo on Soviet mink, fox and other furs. He argued that such import helped to finance world communism. The USA has also maintained an embargo on Cuban goods since 1959, when Fidel Castro took power there. This embargo severely damaged Cuba’s sugar industry and deprived American smokers of the fame Havana cigars. In 1985 President Reagan imposed a similar embargo on trade with Nicaragua.

A government can give subsidies (money) to domestic producers to give them advantage against foreign firms in the home and domestic markets.

Currencies of most nations are bought and sold as any kind of goods. The price at which a currency can be bought or sold is its exchange rate.

Part III Contract. Clauses of Contract

1. Remember the words:

• agreement

• profit

• loss

• assets

• transaction

• terms of payment

• insurance

• delivery

2. Read and translate the text:

It is more common to draw up a formal, written agreement before the business is started. This is known as the contract. It often covers areas such as:

• how the profits and losses will be shared

• the method to be followed if a partner withdraws or dies or new ones enter the business

• how the assets will be divided in case the business is ended

• the duties of the partners

• the manner in which any disagreements arising out of the contract will be settled.

At the bottom, after all these provisions are listed, there is a place for the partners to sign their names.

So, contract forms the basis of a transaction between the Buyers and the Sellers, and great care is exercised when the Contract is being prepared that all legal obligations have been started. As a rule the Contract contains a number of clauses, such as: