This document discusses governmental trade barriers and reasons for their use. It outlines both economic and non-economic reasons for governments to intervene in trade, such as protecting infant industries, maintaining employment, and preserving national identity. Common trade barriers include tariffs, quotas, subsidies, and embargoes. Tariffs directly affect prices through import or export taxes, while non-tariff barriers can influence prices or quantities through measures like import quotas or subsidies. In general, governments employ various trade restrictions and supports to influence their country's trade relationships and performance for both economic and strategic policy reasons.

1. Trade Barriers: Governmental
Influence on Trade
Presented By:
Jatin Vaid
jatinvaid@gmail.com
1International Business - Jatin Vaid

2. Protectionism
• Company’s performance, ability to compete
and survival depends on government’s trade
policies.
• Policies may limit or enhance the ability to sell
abroad.
• Restrictions (Tariffs, etc.) or Competitive
support (subsidies, etc.)
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3. Reasons for governmental intervention
• Preventing Unemployment
• Protecting Infant Industries
• Promoting Industrialization
• Improving Comparative Position
Economic
Reasons
• Maintaining Essential industries
• Dealing with unfriendly countries
• Maintaining Control
• Preserving National Identity
Non – Economic
Reasons
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4. 1. ECONOMIC REASONS
Reasons for Government’s
Intervention
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5. 1.1 Preventing Unemployment
• Economic employment of full employment
• Gaining jobs by limiting imports
• Other countries may retaliate
• Impact on other industries
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6. 1.2 Protecting Infant Industries
• Government should shield an emerging industry
from foreign competition by guaranteeing it a
large share of domestic market until it is ready to
compete.
• Efficiency gains take time
• Economies of scale & experience curve translate
into higher productivity
• Benefits include higher employment, lower social
costs and higher tax revenues
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7. 1.3 Promoting Industrialization
• Higher manufacturing base leads to higher per
capita income
• Restricting imports leads to developing an
industrial base
• Increase FDI
• Export – led development for local consumption
• Nation building: Build infrastructure, rural
development, skill building
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8. 1.4 Improving Comparative Position
• Nation’s absolute economic welfare compared
with other nations
• Balance of trade adjustments
• Gaining access to foreign markets
• Restrictions as bargaining tool
• Controlling prices
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9. 2. NON – ECONOMIC REASONS
Reasons for Government’s
Intervention
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10. 2. Non – Economic Reasons
2.1 Maintaining essential industries:
• Protect essential domestic industries
• Financial inclusion of necessities
• Rural penetration at affordable prices
• Maintaining competitive advantages in
essential industries.
• Water, electricity, banking, railways, etc.
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11. 2.2 Dealing with unfriendly countries
• National defense
• Trade of strategic goods – data encryption
technology, arms & ammunitions, banking,
etc.
• Used as a method to achieve political
objectives
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12. 2.3 Maintaining Control
• Governments give aid to and encourage
imports from countries that join a political
alliance or vote in a preferred way within
international bodies.
• Political motives
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13. 2.4 Preserving national identity
• Unifying sense of identity to be sustained
• National culture to be protected
• Defining boundaries for trade
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14. Instruments of Trade Control
• Import tariffs
• Export Tariffs
• Transit Tariffs
Tariff
Barriers
• Subsidies
• Tied Aids
• Minimum Sale Price
• Quotas
• Embargoes
• Buy – Local Legislation
• Specific Permissions Required
Non – Tariff
Barriers
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15. Tariff Barriers
• Directly affect the prices of goods traded
• Also called Duty or tax levied on goods traded
internationally.
• Most common type of trade control
• Specific duty; Ad – Valorem duty; Compound
duty.
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16. Types of tariffs
i. Import tariffs: Collected by importing
country
ii. Export tariffs: Collected by exporting country
iii. Transit tariffs: Collected by the country
through which the goods have passed.
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17. Non Tariff Barriers
• May directly affect either price or quantity of
goods traded internationally.
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18. Types of Non – Tariff Barriers
i. Subsidies: Direct assistance to companies,
making them more competitive.
ii. Tied Aids: Loans to other countries, a part of
which is spend in donor country. E.g.
Infrastructure, telecommunication.
iii. Minimum sale price: Goods sold at a price
set by authorities after clearances.
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19. .
iv. Quotas: Limiting the quantity of goods
imported or exported at a given time frame.
v. Embargoes: Prohibits all forms of trade from
a country or a category of goods.
vi. Buy – Local: Favoring domestic producers or
goods of local origin.
vii. Specific Permissions: import or export
license.
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20. THANK YOU!
jatinvaid@gmail.com
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