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Concept
Trade barrier
Summary
Trade barriers are government-induced restrictions on international trade. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency.
Most trade barriers work on the same principle: the imposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price or availability of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade war results. Barriers take the form of tariffs (which impose a financial burden on imports) and non-tariff barriers to trade (which uses other overt and covert means to restrict imports and occasionally exports). In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel.
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. Small states tend to have lower trade barriers than large states. The most common trade barriers are on agricultural goods. Textiles, apparel and footwear are the manufactured goods which are most commonly protected by trade barriers. Tariffs have been declining in the last twenty years as the influence of the World Trade Organization has grown, but states have increased their use of non-tariff barriers.
According to Chad Bown and Meredith Crowley, world trade is "probably" vastly more liberal in current times than was the case historically. According to Ronald Findlay and Kevin H. O’Rourke, "for the nineteenth and twentieth centuries trade barriers and transport costs were the most important barriers to trade". They also write, "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.
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