International Trade Barriers, Balance of Payments, and Protectionism

International Trade: Barriers, Payments, and Protectionism

• Trade Barriers: Tariff or non-tariff measures.
• Balance of Payments: When trading, financial transactions occur among consumers worldwide, creating constant money flow. This is "the system of accounts that records a nation's international financial transactions, transactions between inhabitants and worldwide, using a double-entry bookkeeping system."
• Payments:
  • Goods imported
  • Spending by tourists
  • Outside investment
  • Foreign military spending
  Receipts:
  • Exports
  • Transportation payments
  • Payments from FDI abroad
• Accounts:
  • Current Account: Export and import of goods and services.
  • Capital Account: Record of investment (direct, portfolio, short-term).
  • Reserves: Export and import of gold, changes in foreign exchange, and liabilities to the central bank.
• Protectionism: Justifications include employment, business size, retaliation and bargaining, general protection, keeping money within the country, capital accumulation, conservation of natural resources, protection of industry, and national defense.
• Tariff Barriers: A tax or fee charged by the government (ad valorem, specific duty). These can:
  • Increase inflationary pressures
  • Create special interest privileges
  • Increase government control
  • Weaken the balance of payments position
  • Distort supply and demand patterns
  • Strain international relations
  • Restrict the supply of resources, choices, and competition
• Non-Tariff Barriers: Specific limitations, customs entry procedures, standards, government participation, charges on imports, and other restrictions.
• Monetary Barriers:
  • Blocked Currency: Refusing to allow importers to exchange national currency for the seller's currency.
  • Differential Exchange Rates: Applying different exchange rates to goods that the government deems desirable or undesirable.
  • Government Approval: Requiring an exchange permit from the government to import goods.
• OTCA (Omnibus Trade and Competitiveness Act): Allows free trade with the USA but without granting equal access to US products. Focused on correcting injustices in trade, dealing with deficits, protectionism, and fairness in trading.
• GATT (General Agreement on Tariffs and Trade): Based on a non-discriminatory basis, protection through customs tariffs, and consultation as the primary method to solve problems.
• WTO (World Trade Organization): Comprises 132 members and uses experts to rule on trade disputes.
• IMF (International Monetary Fund) and World Bank: Assist nations in becoming economically viable, helping stabilize financial markets, and aiding countries seeking economic development.