Tarde Restrictions

Despite the advantages of free trade, many nations impose limits on trade for a variety of reasons. The main types of trade restrictions are tariffs, quotas, embargoes, licensing requirements, standards, and subsidies.

Tariffs, taxes on imports, raise the price of imported goods, which increases the demand and price for the same goods produced by domestic suppliers. Revenues from tariffs are collected by the domestic government.

Quotas put a legal limit on the amount that can be imported, creating shortages which cause prices to rise. A quota benefits domestic producers in the same way a tariff does, but the additional money expended on foreign goods goes to the foreign producers, not the domestic government.

Embargoes prohibit trade with other nations. They bar a foreign nation's imports or ban exports to that nation or both.

Licenses may be required of importers of foreign goods so that imports can be restricted by limiting the number of licenses issued. Export licenses may be required in order to implement partial embargoes on trade with specific nations.

Standards are laws or regulations establishing health and safety standards for imported goods, frequently much stricter than those applied to domestically produced goods.

Subsidies are payments made by governments to their domestic producers to enable them to compete with foreign competitors. They are usually intended to be temporary, allowing domestic producers to acquire new technology or to survive a short-term problem, but they frequently linger on for many years. It is difficult to dislodge entrenched special interests. Taxpayers bear the costs of subsidy payments.

Trade restrictions limit world trade, diminish economic efficiency, reduce total production and employment, raise prices, and encourage retaliation. They benefit some domestic companies and their workers at the expense of foreign companies and workers,