Global Financing and Exchange Rate Mechanisms

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Tariff and Non-Tariff Barriers

Tariff and non-tariff barriers are the means that are usually employed by nations to regulate trade practices. These tariffs are mostly employed on import and export goods. A nation will decide to impose high tariffs on import commodities to discourage the influx of such a commodity in the country. This usually happens when the nation feels that there is already enough of such a commodity in the country and any more import may threaten the local market. In case the country feels that more of a certain commodity is needed in a country, it will either lift the tariff barriers or lower the rates. (Siebert, 2007)

Non-tariff trade barriers are usually employed to restrict the number of goods imported. Through the process of using tariffs, non-tariff barriers to trade in agricultural commodities were eliminated through GATT negotiations (Siebert, 2007). One of the major means that the government uses to restrict imports is by employing domestic content requirements. Through this procedure, commodities brought into a country are supposed to meet certain conditions. This is usually done to promote domestic products. It is a means that is mostly employed in developing counties to increase the quality of goods produced. They are required to produce goods that will comply with certain international standards to prevent similar goods from being imported. As a result, high-quality products have been observed in the production of automobiles and textiles.

Another non-tariff barrier employed is the issue of import licenses. In this procedure, importers are required to obtain an import license for all the commodities that they bring into a country. Through this, the government can monitor the kind of commodities that are being imported and in what quantities. Whenever there is a need to minimize the quantities imported, the government will simply deny the importers the licenses.

The government also uses agencies known as import state trading enterprises to minimize imports. This is an organization that has been sanctioned by the government to buy a certain commodity from importers. This organization is also endowed with the responsibility of being the sole trader of such a commodity. Imports are restricted by this organization by buying a certain commodity at a world price and selling the same at a higher domestic rate (John, 2003). By doing this, the local consumers are restricted from using the imported commodity and instead purchase the locally produced one.

Technical trade barriers are another example of a non-tariff trade barrier. In this method, technical rules are placed on the commodities on how they should be packed and labeled before they are allowed to enter into a country. Technical barriers are usually minor and almost irrelevant measures that a country imposes on imported commodities. A country may for example require that only a certain strict size of fruits be allowed access into a country. This is usually done to completely bar some commodities into the country where there is already sufficient production of the same.

Exchange rate management policies are other means that are used especially to minimize imports of agricultural goods. The exchange rate can be defined as the amount used by a country to buy the currency of another country. This is usually done by managing the exchange rate of a country by making the goods imported to be expensive (David, 2006). These policies are employed to discourage imports and on the other hand encouraged exports.

The main justification for imposing such restrictions on commodities is simply because; the government has to take precautions. Due to the different environmental conditions experienced in other countries, some commodities may not be appropriate for some countries. The use of such commodities may cause environmental hazards and harmful diseases. Some of the internationally manufactured products may contain harmful chemicals that may put the residents at risk of developing complications such as cancers. There is also a risk of food poisoning on some of the commodities that take a long time on transit and thus reaching the destination country when they are already not fit for consumption.

The government has a responsibility of protecting the local industry from extinction. When imported commodities are allowed access into a country without any restrictions, they may be preferred by the local consumers over the locally manufactured ones. With such a continuous trend, the local industries will have no market share which will subsequently run into recession. The economy of a country is determined by how much of its products can be sold on both the local and international markets. When a country exports more than it imports, it will have a strong economy. Such an economy can only be experienced when the government works towards improving the quality of goods produced and minimizing imports as much as it can.

Countries that strictly observe the tariff and non-tariff barriers have high chances of developing. Such barriers encourage innovations among the citizens of a country. Unnecessary competition is also minimized, which in most cases makes the local traders run at a loss by reducing the price of commodities to compete with international brands. (John, 2003)

References

David M. (2006): International Monetary Power Cornell University Press pp32-38.

John C. (2003): Wealth by association: Greenwood Publishing pp12-15.

Siebert H. (2007): The world economy: Rutledge a global analysis pp17-22.

Click Here To Order Now!

Global Financing and Exchange Rate Mechanisms

Do you need this or any other assignment done for you from scratch?

We have qualified writers to help you.

We assure you a quality paper that is 100% free from plagiarism and AI.

You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)