BARRIERS TO FOREIGN TRADE
in economically backward countries, obstacles have been raised in the way (If free foreign trade. Obstruction to foreign trade may take various forms. Among these arc: (I) Prohibition of imports or exports, (2) exchange control, (3) customs duties, (4) preferential treatment, (5) quotas, (6) import licences, and (7)import monopolies. A few words may be said about each of these. Prohibition. Sometimes import of certain commodities is prohibited by law or allowed only under defined conditions. For instance there arc “sanitary regulations”. The United States once excluded beef from a certain region in Argentina where foot and mouth disease had attacked cattle. Later, the embargo was extended to the whole of Argentina. .Sometimes countries indirectly curtail imports by refusing to export certain materials until they have been processed at home. “Rumania did not let her oils out except 011 the condition that it he first refined at home, while Hungary will not admit Rumanian oil except on the condition that ill be refined alter it is received.’? EM’hanl!c (·ulltrnl. Exchange control implies government interference with the buying and selling ~ or foreign exchange. In this way. foreign trade is curtailed and driven into fixed channels. Government may “allot” exchange or ration it out so that importers can buy only a limited amount of g~s in foreign countries. Or they may “block” exchange, For instance, an American exporting goods to Germany may be required to use the marks exchange thus obtained in purchasing goods in Germany. Another way is known as exchange “clearing.” Thus. a German buying goods worth $ 1.000 from America may be required to deposit
this amount in a German bank, while a German selling goods worth $1,000 to an American may draw on the bank for payment. In this way, an attempt is made to carry on Iracing trade without the use of foreign exchange. Customs »util’s. This is an old method and consists in imposing import or export duties on goods coming into out of the country. respectively.Import duties arc more common than export duties. duty is said to be SI)(‘dfk when it is imposed according to a standard of weight or measurement. 6 Paisa per yard of cloth or two rupees per 40 kg. of wheat. etc. The duty is called udvolercru when it is imposed according 10 value. e.g .• 10 per cent on motor cars or radio sets. Customs duties or tariffs may have either revenue
or protection as their aim. To industry. an export duty on raw colton may be imposed to cheapen it for the home manufacturer or an import duty on cotton manufactures may he levied. 11lC latter is the usual method. The revenue duty is lor revenue primarily and is levied for the financial year. It may be revised or discontinued in the next budget. TIle protective duty has greater continuity. Since the intention is to attract labor and capital to a particular industry, it must be levied fur a number of years. Preferential Trench. Sometimes discrimination
is made in the rate of duties with regard to different countries. For instance, India gave preferential treatment In certain British goods under the Ottawa Agreement of 1932. India also received preferential treatment in the British arkets against non-Empire goods. This is known as Such are s curtail international trade and lead to the development of trade blocs. Moreover. countries whose goods pay higher duties may retaliate and impose high duties on the discriminating country in return.