tiểu luận kinh tế quốc tế international trade barrier and case study in china

 To know the various terms of barriers and protectionism  To know the impact of barriers in the countries  To have a more specific view about the current trade war between US and Chin

This report give a concrete and detailed view about international trade barriers According to the term of international economic, we have researched the definition, characteristics of Trade barriers and why it is used And more specifically, we have discussed about the Trade barriers

in China to clearly understand how trade barriers have affected the economy

Trade is an integral part of the total developmental effort and national growth of all economies It particularly plays a central role in the development plan where foreign exchange scarcity constitutes a critical bottleneck International trade is a factor and a product of the economic development of nations and also well known as “engine of growth” International trade increases the number of goods that domestic consumers can choose from, decreases the cost of those goods through increased competition, and allows domestic industries to ship their products abroad

In this paper, we will particularly discuss about international trade barriers and its case study

of Trade barriers in China We all know that international trade benefits all countries even the one that is less efficient than the others However, economists generally agree that trade barriers are detrimental and decrease overall economic efficiency; this can be explained by the theory of comparative advantage Most trade barriers work on the same principle: the imposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price

or availability of the traded products If two or more nations repeatedly use trade barriers against each other, then a trade war results Barriers take the form of tariffs (which impose a financial burden on imports) and non-tariff barriers to trade (which uses other overt and covert means to restrict imports and occasionally exports)

I INTRODUCTION

1 Objective of the study

This paper has been prepared from the corner of some objectives as follows:

 To give a concrete idea about International Trade Barriers and how it impacts on the trade

 To know the various terms of barriers and protectionism

 To know the impact of barriers in the countries

 To have a more specific view about the current trade war between US and China

2 Limitation of the study

Although the study has reached its aims, there were some unavoidable limitations and shortcomings First of all, I am an amateur researcher who is not even expert on the field of study; therefore, it was a tough task to assess the objectives perfectly within short time-limit Secondly, all the data I used in this study is mostly self-reported that is limited by the fact that

it rarely can be independently verified

3 Methodology of the study

This study is generally a non-empirical analysis The main sources of this study include secondary sources like textbooks, reports, relevant national and international legislations, case studies, some important daily newspapers, online documents and some publications

1 Theory of International trade barrier

1.1 Definition

Definition: Trade barriers are government-induced restrictions on international trade, which

generally decrease overall economic efficiency

1.2 Characteristics:

Trade barriers cause a limited choice of products and, therefore, would force customers to pay higher prices and accept inferior quality Trade barriers generally favor rich countries because these countries tend to set international trade policies and standards Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, which can

be explained by the theory of comparative advantage

1.3 Why trade barriers used?

 Protect infant Industries: trade barriers and restrictions tend to protect young and

undeveloped industries that are not large enough to completive with more mature foreign markets and products With governments help these industries have not been grown enough are given a chance to create recognition , a brand name and develop grove in a healthy economical environment With Trade barriers young industries will be protected from foreign competition while they are developing

 Domestic Employment: Another major reason of trade barriers is protection of domestic

employment By putting the trade barriers in front of the imported products governments are promoting domestic produced product or services While demand on domestic products increases the domestic production and domestic employment increases along

 Unfair Trade: In some cases foreign products may be sold in the domestic economy at a price

actually below of its actual cost as a result of foreign governments subsidize their producers With This practice of dumping foreign products may take over the domestic market and give less change to domestic products compete That will allow increase of foreign products in the domestic market

 National Security : trade barriers also needed for protection of industries and companies

those produce important products to the defense and security of the nations The aim is to prevent the country from depending on these vital products or services to another nation Trade barriers prevent foreign producers from unfairly gaining a competitive advantage in the domestic economy and help to level the playing field If it will be used fairly by the governments they could be great tools for international trade and control the trade deficit of a country

 Retaliation: Countries may also set tariffs as a retaliation technique if they think that a trading

partner has not played by the rules For example, if France believes that the United States has

allowed its wine producers to call its domestically produced sparkling wines "Champagne" (a name specific to the Champagne region of France) for too long, it may levy a tariff on imported meat from the United States If the U.S agrees to crack down on the improper labeling, France is likely to stop its retaliation Retaliation can also be employed if a trading partner goes against the government's foreign policy object

1.4 Types of Trade Barriers

1.4.1 Tariffs and Tariff Rate Quotas

Tariffs, which are taxes on imports of commodities into a country or region, are among the oldest forms of government intervention in economic activity

They are implemented for two clear economic purposes First, they provide revenue for the government Second, they improve economic returns to firms and suppliers of resources to

domestic industry that face competition from foreign imports Tariffs are widely used to protect domestic producers’ incomes from foreign competition This protection comes at an economic cost to domestic consumers who pay higher prices for import competing goods and

to the economy as a whole through the inefficient allocation of resources to the import competing domestic industry Therefore, since 1948, when average tariffs on manufactured goods exceeded 30 percent in most developed economies, those economies have sought to reduce tariffs on manufactured goods through several rounds of negotiations under the General Agreement on Tariffs Trade (GATT) A tariff-rate quota (TRQ) combines the idea of a tariff with that of a quota The typical TRQ will set a low tariff for imports of a fixed quantity and a higher tariff for any imports that exceed that initial quantity In a legal sense and at the WTO, countries are allowed to combine the use of two tariffs in the form of a TRQ, even when they have agreed not to use strict import quotas In the United States, important TRQ schedules are set for beef, sugar, peanuts, and many dairy products In each case, the initial tariff rate is quite low, but the over-quota tariff is prohibitive or close to prohibitive for most normal trade Explicit import quotas used to be quite common in agricultural trade They allowed governments to strictly limit the amount of imports of a commodity and thus to plan on a particular import quantity in setting domestic commodity programs Another common non-tariff barrier (NTB) was the so-called “voluntary export restraint” (VER) under which exporting countries would agree to limit shipments of a commodity to the importing country, although often only under threat of some even more restrictive or onerous activity In some

cases, exporters were willing to comply with a VER because they were able to capture economic benefits through higher prices for their exports in the exporting country’s market

There are several types of tariffs:

 Import tariff:

It is the custom duty imposed by the importing country i.e the tax imposed on goods imported It is levied to raise revenue and protect domestic industries

 Export tariff:

It is the duty imposed on goods by the exporting country on its exports Generally, certain mineral and agricultural products are taxed

 Transit duties:

It is levied on commodities that originate in one country, cross another and are consigned to another Transit duties are levied by the country through which the goods pass It results in increased cost of products and reduction in amount of commodities traded

 Other tariff barriers:

Specific duty: It is based on (specific attribute) physical characteristics of goods It is a fixed

or specific amount of money that is levied as tax keeping in view the weight (quantity)/ measurement (volume) of the commodity

Ad valorem duty: These are duties that are imposed according to the value of commodities traded between countries It is generally a fixed percentage of the invoice value of the goods traded

Compound duty: It is a combination of specific duty and ad valorem duty on a single product

It is partly based on quantity and partly on the value of goods

1.4.2 Non-tariff barriers

Non-tariff barriers to trade includes:

 Administrative and bureaucratic delays at the border

Among the methods of non-tariff regulation should be mentioned administrative and bureaucratic delays at the border, which increase uncertainty and the cost of maintaining inventory For example, even though Turkey is in a (partial) customs union with the EU, transport of Turkish goods to the European Union is subject to extensive administrative overheads that Turkey estimates cost it three billion euros a year

 Embargoes

Embargoes are outright prohibition of trade in certain commodities As well as quotas, embargoes may be imposed on imports or exports of particular goods in respect of certain goods supplied to or from specific countries, or in respect of all goods shipped to certain countries Although an embargo may be imposed for phytosanitary reasons, more often the reasons are political (see economic sanctions and international sanctions) Embargoes are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war

 Foreign exchange restrictions and foreign exchange controls

Foreign exchange restrictions and foreign exchange controls occupy an important place among the non-tariff regulatory instruments of foreign economic activity Foreign exchange restrictions constitute the management of transactions between national and foreign operators, either by limiting the supply of foreign currency (to restrict imports) or by state manipulation

of exchange rates (to boost exports and limit imports)

 Import deposits

Another example of foreign trade regulations is import deposits Import deposits is a form of deposit, which the importer must pay the central bank for a definite period of time (non-interest bearing deposit) in an amount equal to all or part of the cost of imported goods

 Administrative regulation of capital movements

At the national level, administrative regulation of capital movements between states is carried out mainly within a framework of bilateral agreements, which include a clear definition of the legal regime, the procedure for the admission of investments and investors It is determined by mode (fair and equitable, national, 'most favored nation'), order of nationalization and compensation, transfer profits and capital repatriation and dispute resolution

 Licenses

The most common instruments of direct regulation of imports (and sometimes export) are licenses and quotas Almost all industrialized countries apply these non-tariff methods The license system requires that a state (through specially authorized office) issues permits for foreign trade transactions of import and export commodities included in the lists of licensed merchandises Product licensing can take many forms and procedures The main types of licenses are general license that permits unrestricted importation or exportation of goods

included in the lists for a certain period of time; and one-time license for a certain product importer (exporter) to import (or export) One-time license indicates a quantity of goods, its cost, its country of origin (or destination), and in some cases also customs point through which import (or export) of goods should be carried out The use of licensing systems as an instrument for foreign trade regulation is based on a number of international level standards agreements In particular, these agreements include some provisions of the General Agreement

on Tariffs and Trade (GATT) / World Trade Organization (WTO) such as the Agreement on Import Licensing Procedures

 Localization requirement

An importing country may require the prospective exporter to include a degree of local participation in the product or service Options include a designated importer, a joint-venture company with majority local control, requirement for complete local manufacture which may imply transfer of intellectual property The WTO has not reached a conclusion on the legitimacy of these measures.[7]

 Standards

Standards take a special place among non-tariff barriers Countries usually impose standards

on classification, labelling and testing of products to ensure that domestic products meet domestic standards, but also to restrict sales of products of foreign manufacture unless they meet or exceed these same standards These standards are sometimes entered to protect the safety and health of local populations and the natural environment

 Quotas

Licensing of foreign trade is closely related to quantitative restrictions – quotas – on imports and exports of certain goods A quota is a limitation in value or in physical terms, imposed on import and export of certain goods for a certain period of time This category includes global quotas with respect to specific countries, seasonal quotas, and so-called "voluntary export restraints" Quantitative controls on foreign trade transactions are carried out through one-time license

Quantitative restrictions on imports and exports are direct administrative forms of government regulation of foreign trade Licenses and quotas limit the independence of enterprises with a regard to entering foreign markets, narrowing the range of countries in which firms can

conduct trade for certain commodities They regulate the range and number of goods permitted for import and export

However, the system of licensing and quota imports and exports, establishing firm control over foreign trade in certain goods, in many cases turns out to be more flexible and effective than economic instruments of foreign trade regulation This can be explained by the fact that licensing and quota systems are an important instrument of trade regulation of the vast majority of the world

This type of trade barrier normally leads to increased costs and limited selection of goods for consumers and higher import prices for companies Import quotas can be unilateral, levied by the country without negotiations with exporting country; or bilateral or multilateral, when they are imposed after negotiations and agreements

An export quota is a limit on the amount of goods that can be exported from a country There are different reasons for imposing export quotas from a country These reasons include guaranteeing of the supply of the products that are in shortage in the domestic market, manipulation of the prices on the international level, and the control of goods strategically important for the country In some cases, the importing countries request exporting countries

to impose voluntary export restraints

2 Case Study in China

2.1 Introduction

First, with the establishment of the WTO organization and the completion of eight rounds of negotiations, trade liberalization has increasingly become a worldwide trend As a result, the level of tariffs has been significantly reduced, and the role of tariff barriers has also dropped Some countries or regions are looking for ways to protect their own trade interests or prevent other countries from entering their domestic markets and seek alternative trade barriers New types of trade barriers rose quickly, various new types of trade barriers, such as technical trade barriers, green trade barriers, etc., due to their own characteristics

of flexibility, concealment, etc., make them more easily used by some countries as tools for trade barriers In this environment, new trade barriers have gradually developed After China’s accession to the WTO, China’s participation in international trade has become more and more numerous, and it has become a world trade power While

participating in international trade China's export trade will inevitably face the threat of new trade barriers

2.2 The concept of New Trade barriers in China

New trade barriers are relative to traditional trade barriers Traditional trade barriers are the general term for traditional tariff barriers and traditional non-tariff barriers Including tariffs, quotas, anti-dumping, anti-subsidy, permits, etc The new trade barriers are centered on technical trade barriers, including social barriers and green barriers Traditional trade barriers mainly restrict the free flow of goods in the international market

on the commercial interests such as the price and quantity of commodities Compared with traditional trade barriers, new trade barriers consider more non-commercial interests than commodity prices and quantities Factors such as social and environmental benefits In these aspects, the restrictions on the free flow of goods in the international community

This is the most fundamental feature of new-type trade barriers relative to traditional trade barriers In addition, the new trade barriers also have the following characteristics: First of all, both sides Unlike the traditional trade barriers, which are simply aimed at restricting trade, new trade barriers have the name of protecting human health and safety On the one hand, they have the benefit of the human society, and on the other, they are liable to cause problems in some countries due to trade restrictions Using it as a hidden trade barrier is not conducive to the free development of international trade

The main types of new trade barriers include technical barriers to trade, green trade barriers and blue trade barriers:

 Green trade barriers are barriers set in the name of protecting human health, resources, and

the environment

Green trade barriers are introduced in order to attract public and corporate awareness as well

as to reduce environmental pollution

These barriers are also considered as non-tariff ones and there is no international organization

or a common policy framework, which is powerful enough to enforce these barriers

Moreover, the difficulty in monitoring environmental problems also creates many challenges

in applying green trade barriers Despite the growing debates and controversies, the trend for imposing green regulations as a non-tariff barrier is upward

 Blue barriers, also known as social trade barriers, which is the working time, rights, and

treatment of workers

On the one hand, it will make some foreign trade companies difficult to manage, on the other hand, it will help solve labor problems under the globalization and promote social progress Therefore, enterprises should enhance the value creativity and value-added products

of their companies and stimulate their operational vigor

2.3 The impact of Trade Barriers on China export’s Trade

As new types of trade barriers have increasingly become the main method of trade barriers

in international trade, China's export trade is also unavoidably affected This kind of influence is two-sided On the one hand, it has a positive effect On the other hand, it has a negative effect In the following, this article will introduce in detail the positive and negative aspects of the impact of new trade barriers on China's export trade

2.3.1 Positive Effects of New Type of Trade Barriers on China's Export Trade

First of all, because TBT - (The WTO Agreement on Technical Barriers to Trade) sets

barriers through high standards and high requirements, for export companies in China, in order to deal with TBT of developed countries, they have to improve technology, improve packaging, etc to improve the technical level of products In addition, in order to be invincible in the international competition, our export enterprises need to improve production efficiency and product quality, which will help improve the international competitiveness of our export products As for those industries that cannot make technological improvements, we will also be involved in international trade Therefore, objectively speaking, technical trade barriers are conducive to optimizing China's export industrial structure