International Marketing

Submitted to: Submitted by:
Dr. Monika Bedi Anubala Bhagat

MBA(B)
Trade barriers are measures that governments or public
authorities introduce to make imported goods or
services less competitive than locally produced goods
and services.
Trade Barriers can be broadly classified into the
following two categories:
 Tariff barriers or fiscal controls
 Non-Tariff Barriers or quantitative restrictions
 Protect home industries from foreign competition
 Promote new industries and research and development.
 Conserve foreign exchange reserve
 Maintain favorable Balance of Payment
 Protect economy from dumping
 Make economy self reliant
 Mobilize public revenue
 Curb conspicuous consumption
Tariffs are extensively used trade barriers. A tariff is designed to
make imports more expensive than domestically produced
goods.
Tariffs are broadly classified on the following basis:
1) On the basis of origin
 Export duty: Export duty is a tax imposed on commodities
exported from a country.
 Import duty: Import duty is a tax imposed on commodities
imported by a country.
 Transit: Transit duty is a tax imposed on a commodity when it
passes through the national frontiers of a country, origination
from and designating for other countries.
2) On the basis of criteria:
 Specific duty: Specific duty is a duty imposed on each unit of a
commodity imported or exported. For example, Rs. 5 on each
metre of cloth imported.
 Add Valorem: Ad Valorem duty is a duty imposed on the
total value of a commodity imported or exported. For
example, 5 % of F.O.B. value of cloth imported.
 Compound duty: Compound duty is combination of
specific and ad valorem duties. For example, % of F.O.B.
value plus 50 paise per metre of cloth imported.
3) On the basis of Purpose:
 Revenue Tariff: Revenue tariff is the tariff imposed in
order to earn revenue for the government for undertaking
various developmental activities.
 Protective Tariff : Protective tariff is imposed in order to
protect infant domestic industries by restricting or
eliminating competition from foreign companies.
 Anti- dumping duty : Anti dumping duty is imposed in
order to eliminate the harmful effects of dumping.
 Countervailing duty : In many countries, duty drawback is
given to exporters in order to enable them to sell their
products at competitive rates in the world markets. To
Countervail the effect of such incentives, countervailing
duties have been devised.
4) On the basis of trade relations:
 Single column tariff: Under this system of tariff, a flat rate
of duty is charged on imports from all countries.
 Double column tariff: Under this system, two rated of
duties are fixed- lower rates for countries having bilateral
trade agreement with duty levying countries and higher
rates for countries having no such agreements.
 Triple column tariff: Under this system, in addition to the
higher and lower rates, there is a third rate called
preferential rate, which is substantially lower and is
applicable to friendly countries having trade agreements.
Quantitative restrictions are more effective than tariff
barriers in controlling the total inflow of goods in
physical terms in the country. These restrictions are
known as non- tariff trade barriers.
(a) Quota: Quota means a restriction on the physical
volume of import or export of a commodity.
 Tariff quota
 Mixing quota
 Unilateral quota
 Bilateral quota
(b) Consular Formalities: Under consular formalities, an
exporter is required to obtain a consular certificate from
the consulate of importing country situated in his country
(c) Trading Blocs: Trading blocs offer special concessions
and preferential treatment to member countries. As a
result, trade with non members is discouraged
(d) Custom Regulations: All the countries of the world laid
down complicated customs regulations in order to put a
check on excessive inflow and outflow of goods. These
formalities act as a barriers to the free flow of trade.
(e) State Trading: In many countries, there is an extensive
monopoly of the government in import and export of
certain commodities. Such action on the part of the
government puts check on the activities of private
individuals.
(f) Export Obligation: Export obligations means obligation
to export products or permission in terms of quantity,
value or both, as may be prescribed by regional or
competent authority.
(g) Exchange Control: The government exercises control
over foreign trade through exchange control. In India,
FERA used to control foreign currency transactions.
(h) Boycott or Embargo: A government boycott is an
absolute restriction against the purchase and importation
of certain goods from other countries.
(i) International standard: Non tariff barriers in this
category include standards to protect health, safety and
product quality.
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International Marketing

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International Marketing

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