Barriers to International Trade

(Protectionism)

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 a 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 100 000 automobiles may be imported from South Korea in one year or x tons of coffee from Brazil. So, quota is restriction on quantity.

Other restrictions upon free trade between countries are embargo, subsidies, exchange control, special rules and regulations.

An embargo is a complete ban upon trade with a particular country. It is usually imposed for political reasons. In 1951 Senator Joseph McCarthy persuaded the US Senate to impose embargo on Soviet mink, fox, and other furs. He argued that such import helped 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.

Importers need foreign currency to pay for imports and governments sometimes limit the amount of currency, which can be bought by their consumers and firms.

All countries have regulations about standards for products. Occasionally these can be deliberately designed to prevent imports.

Firms trying to sell abroad face several special difficulties as difference in languages, tastes and habits, laws and currency changes. How do businesses or individuals obtain the currency of foreign countries? And what determine the value of foreign currency?

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

III. Task

Explain the arguments for and against protectionism. Discuss the effect of protectionism on the economies of both exporting and importing countries. Discuss the problem that a sudden change in the exchange rate can cause.

IV. Translate into English:

1. За останні роки доля імпорту в народному господарстві країни значно виросла. 2. В зовнішній торгівлі фірмам доводиться вирішувати ряд додаткових проблем. 3. Як розраховуються іноземні партнери, якщо в їхніх країнах використовуються різні валюти? 4. Існує міжнародний валютний ринок як для іноземних покупців, так і для продавців валюти. 5. Ціна, за якою продається валюта, називається курсом обміну. 6. Валюта більшості країн продається і купується так само, як акції, облігації чи інші товари. 7. Курс обміну залежить від попиту та пропозиції. 8. Курс валюти може підніматись і падати за дуже короткий період. 9. Різкі зміни в курсі національної валюти створюють серйозні проблеми для населення і для бізнесу.

V. Match the definitions with their descriptions:

1. A limit on the quantity of goods that may a) Exchange rate

be imported in a given time period

2. A prohibition on export or import b)Tariff

3. The ability of a country to produce

specific good with fewer

resources than other countries c) Embargo

4. The price of one country's currency,

advantage expressed in terms of another; d) Comparative

the domestic price of a foreign currency

5. A tax imposed on imported goods e) Absolute advantage

6. The ability of a country to produce

a specific good at a lower cost f) Quota

VI. Translate into Ukrainian:

Дата добавления: 2015-10-29