Different forms/Tools /Instruments of Protectionism   (Trade barriers)

Different forms/Tools /Instruments of Protectionism   (Trade barriers)

  1. Tariffs. A tariff refers to the tax imposed on imports  (import tariff) or exports  (exports tariff) of the  country.   If the country  wants  to reduce  imports,   it increases   import  tariff  (duties) and  if the country  wants  to encourage  exports,  it reduces  the export  duties.

Tariffs can either be Advalorem   or specific.

 Advalorem  tax. This refers to the tax imposed on commodities   basing on their monetary   value. For example 30%   of the value of the imported commodity   as a tax

Specific tax. This is the tax imposed on commodities   basing on their quantities   or units imported for example a tax of 500/= imposed on each unit of the commodity   imported.

  1. Quotas. These are physical or quantitative   restrictions   on the amount   of a commodity   imported into or exported from the country in a given time.  Import quotas restrict the amount of imports to the country and export quotas are restricts the amount of exports.
  2. Foreign exchange control.  This   is where   the   government    restricts    the   supply   of   foreign exchange   for import purposes.   For  example   it  can  allocate   foreign   exchange   at  lower  rates  to importers   of essential  commodities   and  at high  rates  to importers   of non-essential   and  luxurious commodities   so as to reduce  on their  importation.
  3. Trade embargoes (sanctions). This   is where   the   government    prohibits   the   importation     of commodities   from certain countries and exportation   of commodities   to certain   countries   in form of economic sanctions.  Such sanctions are aimed at promoting peace, harmony   and human rights. For example the economic sanctions imposed on Iraq and Zimbabwe by U.S.A.
  4. Deflationary policy. This is where  the  government   through  the central  bank: uses  the  restrictive fiscal  and  monetary   policies   in  order   to  reduce   on  the  amount,  of  money   circulating    in  the economy   so  as  to check  on the  aggregate   demand   for  imports.   This   can help to reduce   on the quantity of imports to the country.
  5. Total ban (Complete ban). This is where the government  completely prohibits   the importation   of a certain commodity   from a given country.  This  is done when  the commodity   is either  harmful, when  there  is political  crisis  between  the two countries  or when  the commodity   is security  risk  to the country.
  6. Administrative controls (restrictions). This is where the government  sets bureaucratic   formalities or  procedures   which  the  importers   or  exporters   have  to  follow  in  the  process   of  international trade.  These   procedures   tend  to  be  lengthy   and  costly   such  that  it  becomes   uneconomical    to import  or export  certain  products  hence  controlling   international   trade.
  7. Subsidization. This   is where   the   government     gives   assistance    to the   producers    of   certain products.    Such   economic    assistance    can   be   in form   of   soft   loans   and   subsidized     inputs particularly   to the domestic producers   of essential products.  This lowers the production   costs and enables the home producers   to sell their commodities   at fair prices in order to compete   favorably with the imported products.
  8. Import licenses. The government  can restrict licenses given to importers   and exporters   of certain commodities   hence controlling   international   trade.
  9. Devaluation. This refers to the deliberate  government   policy of reducing   the value of domestic currency in terms of other currencies.   Devaluation   discourages   imports and encourages   exports. This  is  because   it makes  exports  cheap  to  the  foreigners   and  imports   expensive   to  the  locals. However, this policy can be effective if imports and exports have elastic demand.
  10. Transport discrimination. This is where the government discriminates   against imports in form of high transport   charges   while the locally produced   goods are transported   at low changes.   This discourages   the imports into the country.
  11. State trading. This is where the government takes over the importation   of certain   commodities from private individuals.   In this case the government   restricts   the amount   to be imported   hence controlling   international   trade.
  12. Special import deposits. This  is where   the   government    requires    the   importers    of   certain commodities    to first deposit   a given   amount   of money   with the central   bank   before   being licensed to import.  This reduces on the number   of importers   hence discouraging    imports   in the country.
  13. Quality control standard agencies such as UNBS and National drug authority are used to prevent inferior products from entering the country.
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