Barriers and solutions to international trade

Barriers and solutions to international trade INTRODUCION This essay provides an overview of the barriers to international trade faced by economies today with examples of barriers faced in various countries, and their solutions. International trade promotes high standard of living for trading nations and hence, despite its various ill effects, it is best to practice international trade as it provides economic and social benefits to economies bringing about an upturn in global economy. This essay attempts to bring to light, the general barriers international trade faces presently and its solutions with recent examples. INTERNATIONAL TRADE: AN INTRODUCTION Trade among countries has existed for a long period now. The trade between Asia and Europe marks this fact as Morrison (2006, pp.314-315) examines that these two continents have engaged in Trade since a long period. He also suggests that with time, international trade has come a long way as far as volume and patterns of trade between nations is concerned. Morrison (2006) has re ferred to figures by the World Trade Organisation (2004, cited in International Trade Statistics 2003, World Trade Developments 2002) from the official website of the WTO that Asia’s share of global merchandise exports has gradually increased, Northern America’s share has slightly decreased and Western Europe’s share has recovered from a downfall in 2001, but not as much as it did in 1990. Morrison further suggests, from 2000 to 2002, China’s exports and imports rose by 30 per cent and today, China is one of the world’s largest traders. Therefore, we may note that International trade plays a very essential role in globalization trends in the world economy. UNDERSTANDING ‘TRADE PROTECTIONISM’ Protectionism is †The deliberate use or encouragement of restrictions on imports to enable relatively inefficient domestic producers to compete successfully with foreign producers, or to protect and preserve those industries and producers con sidered of critical national interest.† (McCracken, 2005) Coughlin et al (1988) state that Protectionist Trade Policies are meant to improve the position of domestic products as compared to its foreign equivalents, and that this may be done through various policies – by increment of the market price of the foreign product or by barring access of foreign products to the domestic market. They explain that protectionist trade policies aim to expand domestic production in the protected industries for the benefit of the owners, suppliers and workers of the protected industry. However this may lead to a downturn in the consumption of protected goods due to either associated rise in its price or consumers start using less of other goods as a result of the decline in outputs and increase in prices. Coughlin et al hence, argue that domestic consumers are said to be impaired as the price of the protected goods keep increasing. Hence, imposing of tariffs lead to domestic producers ’ and the government’s gain, while domestic consumers’ and other domestic producers’ loss. These trade policies also affect foreign interests. ‘FREE TRADE’ & ITS THEORIES Free Trade is †trade between nations that is unhampered by Government constraints such as tariffs, restrictions, and other barriers.† (Financial Times Limited, 2009) Theory of Absolute Advantage