Tariff barriers can be used by developing countries in an attempt to protect pioneer producers.
Some barriers to international trade include differences in language, culture, laws and regulations. Trading companies can also encounter misunderstandings about the terms of contracts, leading to problems with paying for goods, freight or insurance. Laws on land, employment, intellectual property and public health vary from country to country and can cause problems for international companies. Movements in exchange rates and rising inflation or interest rates abroad are a trap for unsuspecting traders. Tariffs and quotas on imported goods, combined with subsidies to domestic industries, play the dice against foreign companies in many countries.
Because of advances in technology, cargo ships have reduced a once-important barrier to international trade.
Freight transport was once one of the barriers to international trade, but the development of modern cargo ships, containerization and sophisticated container ports – including inland dry ports – have eased these logistical problems. Misunderstandings in international contracts have been reduced by developing standardized contract terms, while governments often support companies seeking export financing as guarantees. Companies may need to seek advice on how to protect against currency movements and financial risks from trading in another country, including inflation and floating interest rates.
Some barriers to international trade include differences in language, culture, laws and regulations.
When establishing a branch or subsidiary in another country, companies must face licensing laws, company laws, investment regulations and tax rules. They often need local business advice to deal with these issues, but there may also be opportunities such as free zones or special economic zones in another country. Health and safety regulations can cause problems for companies operating in certain industries, including baby food and products. Some companies may need to modify their products to take into account local customs and tastes.
Some countries may place import and export regulations that limit international trade.
The most visible barriers to international trade are tariffs and quotas. Industrialized countries often set high tariffs on imported agricultural products and may combine this with subsidies to their own domestic agricultural producers. They can also impose quotas that limit the amount of certain manufactured goods imported each year. Developing countries may place tariff barriers against imports of goods in certain industries to protect their own pioneer producers. Despite the general consensus that protectionism is harmful to international trade and domestic revenues, countries generally look out for their own national interests when considering trade issues.
International organizations such as the World Trade Organization (WTO) organize talks and negotiations on barriers to international trade. They often focus on sensitive issues such as tariffs and subsidies on agricultural products, tariffs and quotas imposed on manufactured goods, and barriers to the provision of services internationally. Another sensitive issue in international trade is the protection of intellectual property, because international companies often complain that patent protection is insufficient in some countries.