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Consequences Of Trade Restrictions And Tariffs Essay

, Research Paper


Consequences of Trade Restrictions and Tariffs


How does imposing trade restrictions affect a country’s macro economic


objectives?


Nowadays all countries need to trade between themselves. Countries


always lack of some type of good and the only way they can get them is by


importing them from other countries which do produce the desired goods. However,


countries many times import products they are able of producing and now, this


isn?t a matter of need; it?s a matter of taste in order to give the consumers


the possibility to choose.


Both imports and exports contribute, in different ways, to the


development of a certain economy, for example the Peruvian one. Nowadays, Peru


has an open economy which allows importing and exporting. When a country imports


any product it can be because it doesn?t produce it or because it want?s to give


greater variety to certain areas of the market. This last case should be like a


stimuli for national producers to produce more and with a better quality and to


find ways of having lower costs of production. This aims come to light because,


as foreign products enter the market, they may be of a better quality and even


cheaper than the national ones. Now, the consumers will have more possibilities


to choose from and, it is very probbable that they will choose the cheaper and


brand new products. So, if national producers don?t do anything in order to


improve thier products, then they will be in danger of going to bankruptcy. As a


result of this, the national products have to seek, as I said before, for


cheaper costs and better products.


When this occurrs, then national products are ready (or at least have


more possibilities) to compete in international markets. Supposedly, now they


should have a better quality, they should be cheaper and so, they are ready to


be exported. When products are sold at international markets, then this brings


more money into the peruvian economy; as exports are like the salary of a


country (the most important source of money), then this is very positive for the


peruvian economy because we can say that the national income has increased.


So, we have seen how having imports and exports are very benefitial for


any country. However, countries many times apply barriers to import

s coming into


the country in order to protect national products. The most common type of


barrier applied are the tariffs. Tariffs are taxes applied to every imported


product which comes into the country. In Peru, for example, the tariff rate has


two values: one which is 15% of the original price (the most commonly applied)


and the other one which is 25% of the original price (rarely applied, only for


luxurious goods.) By applying this tariffs, then it may not be very profitable


to bring certain products into the country, and, in this way, the national


products are able to keep on in the same way, without worrying about having a


powerfull competence. This type of barrier may allow certain national companies


to keep on being leaders in the national market, even though their products aren?


t export quality. So, if they try to export these products, then they won?t have


much luck in foreign markets because here, in their local markets, they haven?t


developed really good and relatively cheap goods.


However, nowadays there are many international organisations, like NAFTA,


which aim at having a 0% tariff on all the member countries. In this way, there


will be no additional value added to the imported products and, so, if national


companies aren?t well prepared, then they won?t be able to compete and, so, they


will go to bankruptcy. I think that this type of agreements are good for the


companies and their local countries because in the future, where international


trade will be even more important than what is now, any enterprise which isn?t


prepared to compete internationally won?t be able to survive. If these non


tariff measures start to be applied at the present, then companies will get used


to having constant and competent competence and, therefore will not have any


problems in the future.


In conclusion, I think that countries which insist on applying tariffs


are preventing themselves and their own companies from preparing for the future.


In the long run this will be negative for both the country and the companies


because they will not be likely to develop the adequate techniques for competing


internationally and, so, their products won?t be able to be exported and, as a


result, the country?s “salary” (money gained by exporting) will be greatly


reduced.

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