International trade is the most important and most profitable business nowadays but there are some barriers to international trade. For desiring to enter into international trade, we face some obstacles and those are discussed below:
Table of Contents
Barriers to international trade
1. Cultural and social barriers
A nation’s cultural and social forces can restrict international business. Culture consists of a country’s general concept and values and tangible items such as food, clothing, building, etc. Social forces include family, education, religion, and custom. Selling products from one country to another country is sometimes difficult when the culture of the two countries differs significantly.
2. Political barriers
The political climate of a country plays a major impact in international trade. Political violence may change the attitudes towards foreign firms at any time. And this impact can create an unfavorable atmosphere for international business.
3. Tariffs and trade restrictions
Tariffs and trade restrictions are also barriers to international trade. They are discussed below:
- Tariffs: A duty or tax, levied on goods brought into a country. Tariffs can be used to discourage foreign competitors from entering a digestive market. Import tariffs are two types-protective tariffs and revenue Tariffs.
- Quotas: A limit on the amount of a product that can leave or enter a country.
- Embargoes: A total ban on certain imports or exports.
A government boycott is an absolute prohibition on the purchase and importation of certain goods from other countries. For example, Nestle products were boycotted y a certain group that considered the way nestle promoted baby milk formula to be misleading to mothers and harmful to their babies in fewer developed countries.
Non-tariff barriers of this category include standards to protect the health, safety, and product quality. The standards are sometimes used in an unduly stringent or discriminating way to restrict trade.
6. Anti-dumping Penalties
It is one kind of practice whereby a producer intentionally sells its products for less than the cost of the product in order to undermine the competition and take control of the market.
7. Monetary Barriers
There are three such barriers to consider:
- Blocked currency
- Differential exchange rate
- Government approval for securing foreign exchange
The blocked currency is used as a political weapon in response to the difficult balance payments situation. The blockage is accomplished by refusing to allow importers to exchange their national currency for the seller’s currency.
Differential exchange rate
The differential exchange rate is a particularly ingenious method of controlling imports. It encourages the importance of goods the government deems desirable and discourages the importation of goods the government does not want. The essential mechanism requires the importer to pay the varying amount of domestic currency for foreign currency with which to purchase products in different categories. Such as desirable and less desirable products.
Government approval for securing foreign exchange
Countries experiencing severe shortages of foreign exchange often use it. At one time or another, most Latin American and East European countries have required all foreign exchange transactions to be approved by the central bank. Thus importers who want to buy foreign goods must apply for an exchange permit which is permission to exchange an amount of local currency for foreign currency.
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