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Chapter 6

Barriers to
international
trade

Lecture overview
Introduction
Barriers to international trade
a continuing debate
Macro level barriers to international trade
Tariff barriers
Non-tariff barriers
Micro level barriers to international trade
Learning outcomes
Understand the various trade opportunities that
exist among countries
Understand why there are trade barriers in a
growing open free market
Explain the importance for countries to protect
their domestic products and their countries market
mechanism and macro needs
Explain why many different kinds of trade barriers
are in existence today despite the WTOs efforts to
bring about a more liberalised international trading
environment
Learning outcomes
Discuss the fundamental difference between
tariff and non-tariff barriers to trade
Describe the two main ways of applying a tariff
Give brief explanations of each of the types of
tariff and non-tariff barriers
Discuss some of the regulatory measures that
can act as barriers to trade
Offer an opinion as to when each of the
regulatory measures might be justified
Give examples of company level barriers to
international trade

Free trade versus restricted trade: an
ongoing debate
Why the pure free trade model is not feasible
Why the WTO and others advocate less restricted
international trade
Why all governments impose trade barriers to a
greater or lesser extent
How much restriction/ intervention is prudent or
necessary.
Macro level barriers to international trade
Tariff barriers
International trade interventions involving the use of tariffs to
influence the price / appeal of imported or exported goods

A tariff is a schedule or list of duties (taxes) imposed on
imported or exported goods

Non-tariff barriers
A range of non-tariff related deterrents/ obstacles to
international trade activity.
Types of tariff barrier
Import tariffs (most common)
Mainly used to protect local producers against
foreign competition Also used to generate
revenue for poorer countries

Export tariffs
Mainly used to discourage / limit the export of
particular products.
Advantages of protectionism
Helps developing countries in their
industrialisation efforts
Preserves jobs in labour intensive and / or
sensitive industries
Generates additional revenue for governments in
countries with poor tax collection systems
Disadvantages of protectionism

Tends to encourage inefficiency at industry level
and discourages innovation
Makes imported manufacturing inputs more
costly which can affect producers price
competitiveness
Makes imported goods more expensive for the
consumer (especially the poor).
How tariffs are applied
Ad valorem tariff
= fixed % of the customs value of a traded item

E.g. 10% of R2 000 = R200 customs duty

Specific tariff
= fixed monetary amount per unit of a trade item

E.g. R100 per R2 000 product = R100 customs duty
Types of non-tariff barriers
Those which are deliberately imposed:

Import quota
Limits the number of units or total value of a
particular product that can be imported

Export quota
Limits the number of units or total value of a
particular product that can be exported
Types of non-tariff barriers
Embargos
Completely prohibits the import or export of
a particular product

Buy-local legislation
Limits the purchase and / or use of foreign
products in particular categories

Types of non-tariff barrier (continued)
Anti-dumping duties and countervailing
duties
Applied to dumped goods to bring prices
back to fair, market-related levels.
Countervailing duties are applied where
dumping is the result of subsidisation

Safeguard measures
Imposed temporarily to remove competitive
threat of unexpected, cheaper imports
Types of non-tariff barrier (continued)
Regulatory matters
Regulations to ensure every industry would be at
minimum be compliant with the macro goals of the
country
Standards (health, safety, environment)
Specify minimum levels of acceptable quality in the
composition or performance of specific products

Environmental regulations
Measures designed to reduce the degradation of air,
land, and water systems in the country

Types of non-tariff barrier (continued)
Mining challenges and water protection
Requirements imposes regarding the use of these
resources

Foreign exchange controls
Limit the number and/ or value of transactions
involving foreign exchange

Rules of origin
Criteria by which the country of origin of a product
(inputs + degree of processing) can be determined
Types of non-tariff barrier (continued)
Those which are not deliberately imposed:

Bureaucracy
Lack of institutional capacity
Bribery and corruption
Unfavourable geographical/ climatic
conditions in and en route to foreign markets.

Micro level barriers to international trade
Knowledge and skills constraints
A shortage of sufficiently knowledgeable,
experienced and capable people to perform current
tasks and drive new initiatives
Capacity constraints
Insufficient human resources, technical and
managerial talent, and experience in an organisation
which leads to slow output / sub-standard
performance
Micro level barriers to international trade

Time constraints
A common problem faced by business people
today which can lead to production deficiencies,
communication problems and stress
Financial constraints
A shortage of funds or difficulty of accessing
capital to pursue a business venture.
Prevalence of different trade barriers
amongst different country groups

Category of trade barrier
Most commonly associated with:

First World
countries ?
Least developed
countries ?
South Africa ?
Tariffs Yes Yes Yes
Quotas Yes
Embargoes Yes
Buy-local legislation Yes
Anti-dumping / countervailing duties Yes
Safeguard measures Yes
Standards (health, quality, environment) Yes Yes
Foreign exchange controls Yes Yes
Customs controls / procedures Yes Yes Yes
Rules of origin Yes Yes Yes
Bureaucracy Yes Yes
Lack of institutional capacity Yes Yes
Bribery and corruption Yes Yes
Unfavourable geographic conditions Yes