(A) Forms of Restrictions on International Trade
The most prime source of restriction on international trades is the nation’s governmental policies such as tariff and quotas. Tariff can be described as the tax imposed on import of goods from foreign countries (Levinsohn & Slemrod, 1993). Quotas on the other hand, can be illustrated as the limitation of a good that can be sold in a nation.
Moreover, tariff can be elucidated as the custom duty or the tax levied upon goods as it cross enters national frontiers (Levinsohn & Slemrod, 1993). The tariff is enforced by the government of importing countries. In most countries, tariff on agricultural products such as rice, fruits and vegetables are on average more elevated than industrial products even though there is a substantial miscellany from one country to another (Baldwin, 2011). By imposing tariff, distributors are forced to sell the import products at a bump upped price. The purpose is to encourage consumers to shift attention to domestic products than foreign products. Hence, local entrepreneurs will be able to grow and expand their business plans. In other word, tariff will able to alter the relative price of goods from foreign countries (Head & Ries, 1999). The enforcement of tariff will able to protect local firms in operating their business.
In Malaysia, high tariff and non-tariff trade barriers is enforced on the automobile industry towards foreign competitors such as BMW, Toyota, Honda, and Nyundai (Royal Malaysian Customs Department, 2013). The reason being is to encourage the development and growth of domestic automobiles of Proton and Perodua.
Another restriction on international trade would be export subsidies. Export subsidies can be illustrated as the government’s financial support towards domestic producers to promote export of goods (Brander & Spencer, 1985). The subsidy discourages sale of goods in the domestic market. Foreign importers pay for the domestic goods at reduced price...