Trade barriers are any of a number of government-placed restrictions on trade between nations. The most common ones are things like subsidies, tariffs, quotas, duties, and embargoes. The term free trade refers to the theoretical removal of all trade barriers, allowing for completely free and unfettered trade. In practice, however, no nation fully embraces free trade, as all nations utilize some assortment of barriers for their own benefit.
Tariffs are a fairly common form of trade barriers, and are essentially taxes on goods as they cross the borders of a nation. Tariffs nearly always are placed on goods that are brought into the country, as opposed to goods sold as exports, although in some cases they may go both ways. Historically, tariffs were a large source of government revenue, as they could easily be collected as a tax on ships as they landed in the nation.
Tariffs may be imposed for different reasons. Some tariffs are placed simply to earn money for the government. This might either be a flat fee on an item, or it might be based on the market value of the item. Other tariffs exist as a form of protectionism, to make imported goods more expensive than they might otherwise be, in order to protect domestic industries. For example, if a country has a fairly high wage, and high labor standards, the cost of producing a single widget might be around ten units. If a nearby country can produce a widget for three units, then imports of that country’s widgets could easily drive the domestic industry out of business. So the country might place a restrictive tariff on widget imports, to make sure that domestic widgets always remained competitively priced, or even to make it unfeasible for widgets to be imported at all.
Subsidies are another of the common trade barriers, and are often placed to protect domestic industries. Subsidies may actually be intended simply to make certain key goods affordable to citizens of the nation, but the end result can still be to make imports non-competitive. Many food crops, for example, are heavily subsidized, to ensure the citizenry has a constant supply of affordable food. Steel is also often subsidized, to ensure a nation always has a domestic steel supply, which can be crucial during times of war when normal shipping avenues may be cut off.
An embargo can be seen as the most extreme of the trade barriers. Embargoes basically prohibit the import or export of anything with another country. This is often done as a form of punishment, or to try to force the country to undergo radical change internally as a result of a weakened economic state. Historically, the embargo was used as a war tactic, and so was often considered a declaration of war. In modern times, however, although the most brutal of barriers, it is usually not viewed as an act of outright aggression, although a declaration of war is often accompanied by an embargo.
A number of free trade bodies exist in the world to try to curtail the use of trade barriers by nations. The World Trade Organization is perhaps the widest reaching of these bodies, and it enforces strict rules against member nations, restricting the acceptable use of things like tariffs. As a result, some countries have begun using trade barriers that are not tariffs, but have similar effects. The European Union, for example, does not allow the import of many genetically-modified organisms, which effectively bans the vast majority of food imports from the United States. In recent years, groups like the WTO have begun to look at these forms of trade barriers as well, and to strip them when possible.
