INTERNATIONAL TRADE 1
1. Name the twogreatest obstacles to fair and free international trade. Explain whythey are obstacles.
Several obstaclesrestrict free and fair international trade. For example, differenttariffs have been established to reduce imports and raise revenue(WTO, 2014). In this regard, duties serve to limit foreigncompetition and hence allow domestic producers to flourish. Higherprices for imported goods lower their demand and reduce supply.Tariffs could be deployed as a retaliatory measure to counter theactions of trading partners (Gandolfo, 2014). Other taxes are leviedto revive domestic markets and equalize prices.
Moreover,nontariff barriers refer to obstacles such as quotas, sanctions,embargoes, export restraints, and licenses (Gandolfo, 2014).Countries may set clearly-defined limits on the number of importspermitted within a particular timeframe (Gandolfo, 2014). Tradinglicenses are also issued to specific organizations to regulate themovement of sensitive goods. Some countries may be hit with varioussanctions to limit their trading activity (Gandolfo, 2014). Suchrestrictions are ordinarily set by international institutions such asthe World Bank. Health or political circumstances could force somegovernments to implement embargoes. Additionally, regional alliancesare used as the basis for enforcing voluntary export restraints(Gandolfo, 2014). In many instances, developed nations have thediscretion to impose restrictions on other countries due to theireconomic prowess.
2. Name anddescribe any international efforts that have been made to addressthese obstacles.
Trade agreements have been formed to regulate business transactionsamong different countries (WTO, 2014). Such guidelines have beenapplied to groups of exports and imports. In 1947, the GeneralAgreement on Tariffs and Trade (GATT) was signed to ensureliberalization of commercial activities (WTO, 2014). Subsequently,talks have been held in various countries to reduce tariffs andtackle environmental concerns. Besides, many nations have formedregional blocs to enhance the creation of free trade zones. Suchagreements ensure equal access to markets among members, promoteeconomic growth, and liberalize trading activities (WTO, 2014). Someof the most prominent trade zones include the Association ofSoutheast Asian Nations (ASEAN), the North American Free TradeAgreement (NAFTA), and the European Union (EU). In fact, institutionssuch as the EU use standardized currencies to encourage trade amongmember countries (WTO, 2014).
Additionally, theWorld Trade Organization (WTO) spearheads the efforts geared towardseradicating barriers to international commerce. For example, theinstitution provides training and technical assistance to developingnations (WTO, 2014). Furthermore, WTO monitors trade policies andadministers agreements among countries (WTO, 2014). It also providesa platform for sovereign states to hold negotiations and resolveemerging disputes.
3. Assess theeffectiveness of these efforts. To what extent have they succeeded?
Internationalefforts to eliminate trade barriers have had reasonable success. Inparticular, the majority of countries have become members of WTO.Hence, they have adopted practices and guidelines that foster tradeamong different nations. Granted, several dissenting groups havecampaigned for protectionism to safeguard their interests (Mello &Vijil, 2014). Moreover, some developed countries have maintainedtextile tariffs and agricultural subsidies to block imports ofclothing and food from developing nations (Mello & Vijil, 2014).Other nontariff barriers are yet to be completely eradicated. Also,economic and political obstacles have hindered international tradeamong developing countries. For example, lack of properinfrastructure limits the transportation of goods. Additionally,expensive air travel increases the cost of doing business anddiscourages private investments. Corruption and insecurity have alsoundermined the success of endeavors to eliminate trading constraints(Mello & Vijil, 2014).
Notwithstanding,efforts to liberalize trade have led to a worldwide reduction intariffs and other barriers. In fact, many imports are now exempt fromquotas while revenues from tariffs have reduced (Mello & Vijil,2014). The operation of regional trading blocs contributes to theexistence of free and fair international trade.
Gandolfo, G. (2014). International trade theory and policy(2nd ed.). Berlin, Germany: Springer.
Mello, J. D. & Vijil, M. (2014). Barriers to trade inenvironmental goods and environmental services: How important arethey? How much progress at reducing them? London, UK: CEPR.
World Trade Organization (WTO). (2014). Technical barriers totrade. Geneva, Switzerland: World Trade Organization.