Barriers to international trade â tariffs and trading blocs
international tradeThe buying and selling of goods and services between different countries. has some potential barriers that can make it difficult for businesses to trade with some countries. The main two trading barriers are tariffsA tax added to the cost of imports. and trading blocA group of countries who have agreed to share trading agreements, and minimise barriers of trade between them..
Tariffs
A tariff is a tax on importGoods or services which enter a country. goods and services. Many countries place tariffs on imported goods and services to make them more expensive for businesses and consumers to buy. They do this to restrict demand. By doing this, they aim to promote and protect businesses in the home country. This is known as a protectionismProtectionism is the process of protecting domestic industries by adding tariffs or taxes onto imports. measure.
Tariffs have the following advantages and disadvantages:
| Advantages | Disadvantages |
| More money for the government | Imported goods and services become more expensive |
| Businesses in the home country have a better chance of competing | May cause other countries to impose tariffs in response, affecting exporters |
| Advantages | More money for the government |
|---|---|
| Disadvantages | Imported goods and services become more expensive |
| Advantages | Businesses in the home country have a better chance of competing |
|---|---|
| Disadvantages | May cause other countries to impose tariffs in response, affecting exporters |
Trading blocs
A trading bloc is another potential barrier to international trade. A trading bloc is a group of countries that work together to provide special deals for trading. This promotes trade between specific countries within the bloc.
The European Union (EU) is an example of a trading bloc. All of the countries within the EU can trade freely with each other, which means that no tariffs are put in place. This makes goods and services cheaper, which is good for both businesses that exportsProducts and services produced by a country and sold to other countries around the world. and businesses that import within the EU. However, the EU also charges tariffs on many goods and services imported from outside the EU, which makes them more expensive.
Trading blocs have the following advantages and disadvantages:
| Advantages | Disadvantages |
| Promotes free trade, which means trading without tariffs | Importing and exporting to countries outside the trading bloc can be expensive |
| There is often free movement of labour, eg people, across trading blocs | Countries can often only be part of one trading bloc, which means they cannot enter others |
| Creates good trading relationships with other countries in the trading bloc |
| Advantages | Promotes free trade, which means trading without tariffs |
|---|---|
| Disadvantages | Importing and exporting to countries outside the trading bloc can be expensive |
| Advantages | There is often free movement of labour, eg people, across trading blocs |
|---|---|
| Disadvantages | Countries can often only be part of one trading bloc, which means they cannot enter others |
| Advantages | Creates good trading relationships with other countries in the trading bloc |
|---|---|
| Disadvantages |