Effects of Trade Barriers in Business Activities
Business activities are subjected to certain restrictions by the government of that country which can be termed as trade barriers. Commonly, the developing countries impose these kinds of barriers like subsidies, tariffs, duties and embargoes. In fact this is against the idea of free trade which has been practicing by the developed nations. The inefficient trade barrier system can adversely affect the country in such a way that the imports and exports to and from will be reduced. This will result in the economy retardation.
However, the competition in the native market will be reduced due to the limited number of products. It will also help to save the domestic products and manufactures inside the country. But it will curbs the right of consumers to enjoy the competition and variety of products. The barriers can be mainly distinguished into two kinds. They are
The kind of tax which is levied on the international goods is termed as tariff barriers. The goods which are imported to the country are subjected to the import duty. The intention of increasing the rate of imported goods is to save the demand of domestic goods. On the other hand, export duty is not often levied on the goods which are exported from the country to curb their export. The other types of tariffs are specific duty (based on the quantity rather than quality), ad valorem duty (quality is calculated in per cent) and compound duty (an amalgamation of specific and ad valorem duty).
All kind of restrictions and rules imposed by the concerned government can be termed as non-tariff barriers. The different kinds are quotas, embargoes, self-imposed limits (VERs), local goods subsidies, technical barriers, and policies of procurement, price fixing of international products, exchange controls, customs valuation and many more.