Trade barrier

The merits of trade barriers are often disputed. Proponents of free trade point to the overall economic gains that result from trade via the theory of comparative advantage, while protectionists argue that trade barriers are necessary to sustain “weak” industries and create a self-sufficient economy. High-income countries tend to have fewer trade barriers than middle income countries which, in turn, tend to have fewer trade barriers than low income countries. The most common goods subject to trade barriers are on agricultural goods, textiles, and apparel. Non-tariff barriers take a variety of forms, including import and export licenses, quotas, subsidies, and embargoes. National firms often lobby their own governments to enact regulations that are designed to keep out foreign firms, though modern trade deals are one way to reduce these barriers to trade. Georgetown University Professor Marc L. Busch and McGill University Professor Krzysztof J. Pelc note that modern trade deals are long and complex because they usually tackle these non-tariff barriers to trade, and these barriers are often more complicated to negotiate than tariffs. Intellectual property (IP) regulations, for example, is a non-tariff barrier to trade that is difficult to regulate: developing countries see IP protections as inadequate while developing countries see the protections themselves as a barrier, creating a conflict that makes negotiation very difficult. == Historical Trends ==

Pre-1914 Before the emergence of liberalism in Europe, mercantilism dominated global trade from the 16th to 18th century. In this era, wealth was equated with power and military capability, and as such, any economic gain that another country experienced was seen as a loss for one’s own country. This view discouraged trade that would be mutually beneficial, believing that in some cases short-term economic sacrifices (e.g. limiting trade) were necessary for long-term security and prosperity. Mercantilist nations aimed to promote trade surpluses, prioritizing exports and discouraging imports through the use of tariffs, colonial restrictions on trade with other nations, and other policies that limited foreign trade. According to Ronald Findlay and Kevin H. O’Rourke, "during the mercantilist era price gaps were as likely to be due to trade monopolies, pirates, and wars as to transport costs and tariffs, which are more easily quantifiable." One mercantilist-era non-tariff barrier to trade, the Navigation Acts, lasted from 1651 to 1849, restricting foreign ships from engaging in trade with any part of the British Empire–including colonies–and prohibiting imports from any non-British territory in Asia, Africa, and America. In the 19th century, informed by Adam Smith’s theory of absolute advantage and David Ricardo’s theory of comparative advantage, supporters of free trade in Britain and Western Europe began to advocate against tariffs, duties, and other trade barriers. Interwar Period Though economic growth did continue in the years marked by World War I and II, a rise in transportation costs, tariffs, and protectionism meant that world trade slowed significantly. From 1913 to 1937 trade per capita had only grown at an average of 3% per decade compared to a rate of 34% from 1881 to 1913. While the relative weight of these factors is somewhat disputed, many scholars point specifically to tariffs to explain this trend, with one study attributing 41% of the fall in world trade to increased trade barriers. The trade barrier rules and tariff concessions that had been drafted before the establishment of the ITO remained in the form of the General Agreement on Tariffs and Trade (GATT). After the formation of the ITO failed, GATT was “transformed from a temporary agreement into a normative institutional framework in which governments pursued multilateral regulation and discussed trade policy.” These regulations–both on tariff and non-tariff barriers–were not without exemptions, however. Developing countries received special and differential treatment (SDT) through exemptions to the most-favored-nation principle (MFN) when it came to exports to wealthy market exports in order to help them compete; governments have the ability to raise tariffs short-term if a certain industry is struggling; measures that protect the environment, public health, or moral standards are also permitted as exceptions to reciprocity and liberalization. The WTO adopted a number of new agreements, including TRIPS, SPS, and TBT, streamlined the dispute process, and imposed legally binding compliance obligations. Tariffs declined in use as the influence of the World Trade Organization grew, but this shrinkage was accompanied by the rise of non-tariff barriers. In the United States, both of Trump’s presidential terms have been marked by protectionist policies: the trade war with China in his first term and the dramatic increase in tariffs across the board in his second. ==Impacts==

On consumers Trade barriers can serve to both help and harm consumers. On one hand, trade barriers can ensure health, safety, and environmental standards on imported goods, overall increasing the quality of available products. Even after the Uruguay round, goods that developing countries are most efficient at producing still face higher levels of protection from the North than other non-agricultural products. Trade barriers such as tariffs on food imports or subsidies for farmers in developed economies lead to overproduction and dumping on world markets, thus lowering world prices to the disadvantage of farmers in developing economies. Additionally, Bernhardt identifies the use of tariffs to discourage developing countries from processing their own agricultural products, with “Canada, the EU, and Japan, for example, charg[ing] tariffs of 42, 24, and 65%, respectively, on fully processed food items but only 3, 15, and 35%, respectively, on the least processed products in this sector.” The Commitment to Development Index measures the effect that rich country trade policies actually have on the developing world. Though the WTO attempted to remedy some of these imbalances through the Doha Development Round beginning in 2001, with agenda items including agriculture and implementation issues with it being widely understood that this was a round that was meant to help developing nations. However, the negotiations were officially declared to be at an impasse in 2011 when major powers refused to make important concessions, especially on agriculture. As a result of these attitudes from wealthy nations, many countries in the Global South turned towards regionalism, forming coalitions such as ASEAN and Mercosur that help bolster economic growth and build networks not beholden to the interests of wealthier economies. ==See also==