Trade Barriers

• A trade barrier is a general term that describes any government policy or regulation that restricts international trade.

• It is like a wall that affects trade between countries

Tariff: What is it?

• It is a tax placed on certain goods that are traded from one country to another

What will a tariff do?

• It is a trade barrier that creates “protectionism.”

• It will help a country “protect” its businesses.

• When a consumer buys a foreign made good, businesses in that country don’t make money.

So…….

• So, governments want to protect businesses that are based in their country.

• This helps keep jobs for people of that country.

How does it work?

• It’s pretty simple. A government puts a high tax on certain goods that are sent in from a different country.

• Consider the purchase of a television. It seems that if you bought a tv that was made in another country, you would pay less.

500 400

• But….if a tariff is placed on the tv coming from another country, it becomes more costly.

• This usually means that people will buy the item that is made in their own country, because it is less costly.

500

400 + 200 tariff = 600

You might be surprised….Goods that currently have tariffs

Embargo: What is it?

• A type of trade barrier where trade with another country is prohibited

What will an embargo do?

The purpose is to put that country in a difficult economic situation

Why would a country impose an embargo?

• It is usually considered a punishment over a previous political act-

A big one…here in our own country

• The United States sold arms to Israel when Israel was attacked in the Yom Kippur War. This was in 1973.

• The Seven Sisters(Middle East OPEC countries) imposed an embargo on the United States, Do you know what that embargo was?

It wasn’t pretty…..

Quota: What is it?

• 35 divided by 5 = 7

• The quotient is 7

But, but, but!!!

• We said “QUOTA,” not quotient.

Yes, and they both have something to do with numbers!

• An import quota is a type of trade barrier that sets a limit on the amount of a good that can be imported into a country.

• Only a certain number of items can be imported.

• Get it? It’s the number thing.

What happens when quotas are imposed?

• When a quota is imposed, the amount of goods that a country can import are reduced.

• The businesses that produce the same type of good benefit in a country that imposes quotas.

Some questions:

• How does a producer of a certain type of good benefit if their country imposes quotas?

• Which is more effective in protecting a country’s business, a quota or a tariff? How?

• If quotas and tariffs can benefit businesses in a country, how can an embargo (which allows no goods to come in) actually hurt a country’s economy?