According to World Trade Organization (WTO), “A greater and more sustained effort to deepen the integration of developing countries into the global trading system through lower trade costs and fewer barriers between countries is essential to eliminating extreme poverty.”1 In 2015, the WTO passionately underscored the crucial need to dismantle trade barriers. Nevertheless, trade barriers continue to cast a dark shadow over global economics.
Trade barriers are established in countries for one main reason: protectionism; that is, the practice of shielding domestic industries from foreign competition through trade. There are different types of trade barriers, including tariff and non-tariff. 2 Reasons for their implementation of both types of barriers include safeguarding the domestic sector from the dumping of cheap products, 3 labor issues due to intense competition for limited job opportunities, and environmental degradation. Their drawbacks include product scarcity, high prices, and lack of competition.4 On the other hand, international trade creates a comparative advantage that enables economic growth and development between countries.5 Comparative advantage allows a country to produce products efficiently with lower opportunity cost (the efficiency of giving up one product for another) than its counterparts.6 Overall, trade barriers impede efficient and cost-effective economies, highlighting the need for free trade.
Despite the advantages of free trade, trade barriers are still frequently applied for certain reasons. Applying these measures protects the domestic sector from cheap commodities; however, their application often causes negative results for the involved countries. To subdivide into categories, trade barriers are broadly classified into tariff and non-tariff. Tariff barriers impose a heavy tax on imports and exports to discourage exports or imports by making them unattractive to trading organizations. On the other hand, non-tariff barriers, which include measures other than taxation7 include diverse and complex strategies to customize methods of regulation according to the specified industry objectives. According to the Organisation for Economic Co-operation and Development (OECD), non-tariff barriers are categorized as “technical” and “non-technical.”8 Technical non-tariff barriers involve certification, testing, and setting standards and involve quantifiable strategies including quotas, price measures, and distribution channel regulations.9 The most common non-technical, non-tariff barriers include licenses, import quotas, subsidies, and other restrictions. Specifically, licenses are granted to businesses by the government to regulate the number of businesses in a sector and their imports
or exports, aiming to regulate competition in an economy, thus enhancing economic performance in the country; the purpose of import quotas is to reduce dumping cases which would affect the domestic market,10 enhancing efficiency without external competition from cheap imports. Subsidies promote the domestic sector and make internally-produced commodities more affordable than imports.11 Therefore, applying free trade is more profitable to a country seeking growth.
Under the framework of efficient specialization based on comparative advantage, free trade serves as a catalyst for enhancing bilateral relationships. According to David Friedman, the Iowa Car Crop demonstrates the contribution of comparative advantage between the United States of America and Japan. Growing wheat in Iowa for domestic demand and to export to Japan enhances the efficient acquisition of automobiles. It creates a market for a surplus of wheat production in Iowa and complements car manufacturing in Detroit. 12 Imposing international trade barriers affects the efficient operations in Iowa and increases car prices due to reduced US production, which affects consumers.13 The Iowa Car Crop case shows that free trade is a cost-effective economic strategy that promotes efficiency and mutual benefit.
Economists, including Adam Smith and John Locke, have significantly contributed to international trade literature. Wealth of Nations by Adam Smith promotes international trade due to its numerous benefits for participating countries.14 In addition, John Locke promoted international relations since it enhanced trade activities for all parties involved.15 Numerous cases of protectionism for domestic sectors showcase its negative effects. During the 1930s Great Depression, stock markets fell, and the US implemented protectionism measures under the Smoot-Howley Tariff Act of 1930.16 However, this act impaired the economy due to the increased cost of acquiring inputs for operations in the US because of decreased productivity and low importation. Moreover, the unemployment rate soared and consumer spending decreased. In short, protectionism backfired, worsening the country’s economy. As a result, Congress passed the 1934 Reciprocal Trade Agreements Act to promote free trade in the US.17
After lifting trade barriers, the US achieved significant economic growth and development. Promoting trade agreements enhances market access for US domestic producers, giving a comparative advantage for acquiring affordable products. Since then, trade with the Eastern part of the world has been instrumental in availing affordable imports to the US, such as Toyota
car imports from Japan, which also lifted protectionism. Additionally, the Asian region has offered a market for many US products, including pork and beef, to be exported to Taiwan.18 In return, Taiwan exports semiconductors to the US, enhancing production activities in firms that rely on such inputs.19 Despite not being the sole factor contributing to economic recovery,
free trade was critical to the recovery from the 1930s Great Depression.20 The North American Free Trade Agreement (NAFTA) facilitates free trade among the US, Canada, and Mexico. 21 It benefits member countries as they grew economically by availing the market for locally-produced commodities. Mexico reported enhanced productivity due to technology and efficiency measures. Conversely, the US achieved a reasonable labor force from Mexico, which enhanced its productivity. Despite its numerous benefits, NAFTA has had some drawbacks, including the loss of employment to Americans, environmental degradation in Mexico, and market competition pressure on domestic producers due to the corn dumping from the US. 22 However, the negative effects of free trade agreements can be mitigated by establishing policies that regulate excessive importation, maintain product quality, and govern social interactions among people from the member countries. Weighing the pros and cons, an open trade environment seems more beneficial.
The perceived adverse effects of NAFTA operations in the US, including excessive labor from Mexico, have resulted in the enactment of protectionism under the Donald Trump administration. The rationale for more protectionism was restoring the declining labor market for Americans’ cheap labor from Mexico and lowered wage rates.23 The change was also intended to promote social welfare and renegotiate trade agreements among China, Mexico,
Canada, and the European Union. In return, the influenced countries imposed protectionism measures against the US, which adversely affected its social welfare. Of late, China has been at the forefront of implementing targeted measures against the US.24 As a result, Trump’s protectionism led to job generation for a small number of Americans in the steel and electronic industries. While the United States government earnings from tariffs doubled in 2019 from 2017,25 American consumers bear the highest costs since the increased operational costs are passed down to the consumers.
Regarding employment creation for Americans, Trump’s policy amounted to a few opportunities for companies with more tariffs imposed against their imports. The steel and
electronic industries, such as Whirlpool and Samsung, reported increased American job opportunities. 26 On the contrary, international partners found the business environment unsuitable for operations due to increasing operational costs. Therefore, they enacted counteractive measures to alleviate their extensive exposure to such detrimental trade policies.
Exports were also impaired because the trade partners did not act in good faith after the US showed its lack of support for the trade relationships.27 Various sectors benefited at the expense of others, while households suffered the most. The negative consequences of trade barriers, as evidenced by Trump’s policies, highlight the urgent need to enhance free trade for efficient economic activities.
The Trump-era trade barriers sought to renegotiate trade agreements and solve issues caused by NAFTA. The affected operations pushed some investors and trade partners away from the US market.28 Its attractiveness to other potential trade allies was tarnished due to the oppressive policies that the Trump administration imposed, affecting social welfare through the restriction of immigration from foreign counties. Chinese technology companies, including TikTok and Huawei, were also targeted. These companies reported challenging operations in the US, which affected their efficiency. Trade barriers by the US to China resulted in a trade war in which China responded with strict protectionism measures against US products, including technology.29 US technology companies, such as WhatsApp, Facebook, Twitter,
Google, and Instagram were banned in China.30 Other banned imports include the Micron chips made in the US, thus affecting the US tech sector.31 The US also set heavy restrictions on Chinese imports from the Xinjiang region, which was reported to have used forced labor and oppressed the Uyghur people.32 Such trade measures have promoted increased inflation in many other countries, suggesting that the trade war has spread its destruction all around the world.
Recent news proves the disadvantage of trade barriers. Recently, Russia’s invasion of Ukraine contributed to the imposition of trade barriers by the EU, the US, and others allied with Ukraine. Established trade barriers influenced the accessibility of funds to finance the war and other EU members who depend on Russia for agricultural and petroleum products.33 Additionally, the trade restrictions affected global economic conditions. There has been an
increasing global fuel prices leading to high inflation rates, ranging from 4.7 percent in 2021 to 8.8 percent in 202234. While the war seems far away, its effects are far-reaching. Trade barriers result in wasteful production and inefficiencies. Protectionism has detrimental results, as companies hike prices to recover the increased operational costs. According to Friedman, in the case of Iowa Car Crop, comparative advantage is valuable for economic growth.35 Therefore, free trade should be enhanced to promote efficient economic activities among countries with comparative advantages.
End Notes
1 “World Trade Organization.” WTO. Accessed July 8, 2023.
2 Jose Jaime et al., “Tariff Barriers and Non-Tariff Barriers: Appraising Colombia’s Protectionism,” Worldcustomsjournal.org, 2020.
3 “World Trade Organization.” WTO. Accessed July 9, 2023.
https://www.wto.org/english/tratop_e/adp_e/adp_info_e.htm#:~:text=Dumping%20is%2C%2 0in%20general%2C%20a%20situation%20of%20,dumping%20simply%20by%20comparing
%20prices%20in%20two%20markets.
4 Ibid
5 Mark J. Perry, “Economics at Its Best – the Story of the ‘Iowa Car Crop,’” Aei.org,
2015, https://www.aei.org/carpe-diem/economics-at-its-best-the-story-of-the-iowa-car-crop/. 6 Mankiw, N Gregory. 2021. Principles of Economics. 9th ed. Boston, Ma, Usa: Cengage Learning.
7 Tariff barriers and non-tariff barriers: Appraising Colombia’s Protectionism. Accessed July 10, 2023. https://www.researchgate.net/publication/344689176_Tariff_barriers_and_non tariff_barriers_appraising_Colombia%27s_protectionism.
8 OECD, “NON-TARIFF MEASURES-Tariffs Are the Tip of the Iceberg: How behind the Border Issues Impact Trade,” Oecd.org, accessed July 5, 2023,
9 Ibid
10 Tariff barriers and non-tariff barriers: Appraising Colombia’s Protectionism. Accessed July 10, 2023.
tariff_barriers_appraising_Colombia%27s_protectionism.
11 Ibid
12 Ibid
13 Ibid
14 “The Wealth of Nations.” Adam Smith Institute. Accessed July 1, 2023. https://www.adamsmith.org/the-wealth-of-nations.
15 Williams, Howard. “John Locke and International Politics.” International Relations and the Limits of Political Theory, 1996, 90–109. https://doi.org/10.1007/978-1-349-24940-4_7. 16 National Bureau of Economic Research, “The Roots of Protectionism in the Great Depression,” Nber.org, 2009, https://www.nber.org/digest/oct09/roots-protectionism-great
depression.
17 Ibid
18 Iowa Farm Bureau, “US Agricultural Commodity Exports to Taiwan: Current Trends and Outlook (Sep. 26, 2022),” iowafarmbureau.com, September 30, 2022,
Current-Trends-and-Outlook-Sep-26-2022.
19 Ibid
20 Ibid
21 Andrew Chatzky, James McBride, and Mohammed Aly Sergie, “NAFTA and the USMCA: Weighing the Impact of North American Trade,” Council on Foreign Relations,
2020, https://www.cfr.org/backgrounder/naftas-economic-impact.
22 Ibid
23 Geoffrey Gertz, “Did Trump’s Tariffs Benefit American Workers and National Security?,” Brookings, September 10, 2020, https://www.brookings.edu/articles/did-trumps-tariffs benefit-american-workers-and-national-security/.
24 David A. Steinberg and Yeling Tan, “Public Responses to Foreign Protectionism: Evidence from the US-China Trade War,” The Review of International Organizations 18, no. 1 (2023): 145–67, https://doi.org/10.1007/s11558-022-09468-y.
25 Geoffrey Gertz, “Did Trump’s Tariffs Benefit American Workers and National Security?,” Brookings, September 10, 2020, https://www.brookings.edu/articles/did-trumps-tariffs
benefit-american-workers-and-national-security/.
26 Ibid
27 Ibid
28 Ibid
29 David A. Steinberg and Yeling Tan, “Public Responses to Foreign Protectionism: Evidence from the US-China Trade War,” The Review of International Organizations 18, no. 1 (2023): 145–67, https://doi.org/10.1007/s11558-022-09468-y.
30 Zhizhuang Chen, “Limitations of Chinese Social Media Censorship and Their Relationships with Government Policies,” Drpress.org, 2023,
31 Peter Hoskins, “China Bans Major Chip Maker Micron from Key Infrastructure Projects,” BBC, May 22, 2023, https://www.bbc.com/news/business-65667746. 32 Annabelle Liang, “US Ban on Imports from China’s Xinjiang Region Takes Effect,” BBC, June 20, 2022, https://www.bbc.com/news/business-61754796.
33 Fabien Tripier et al., “Strength in Unity: The Economic Cost of Trade Restrictions on Russia,” CEPR, 2022, https://cepr.org/voxeu/columns/strength-unity-economic-cost-trade restrictions-russia.
34 “World Economic Outlook, October 2022: Countering the Cost-of-Living Crisis.” IMF, October 11, 2022, https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world
economic-outlook-october-2022.
35 Mark J. Perry, “Economics at Its Best – the Story of the ‘Iowa Car Crop,’” Aei.org.
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