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7 Major Barriers to International Trade:

international trade is the most important and most profitable business nowadays but there are
some barriers to international trade. For desiring to enter into international trade, we face some
obstacles and those are discussed below:

Barriers to international trade

1. Cultural and social barriers: A nations cultural and social forces can restrict
international business. Culture consists of a countrys general concept and values and
tangible items such as food, clothing, building etc. Social forces include family,
education, religion and custom. Selling products from one country to another country is
sometimes difficult when the culture of two countries differ significantly.
2. Political barriers: The political climate of a country plays a major impact on
international trade. Political violence may change the attitudes towards the foreign firms
at any time. And this impact can create an unfavorable atmosphere for international
business.
3. Tariffs and trade restrictions: Tariffs and trade restrictions are also the barriers to
international trade. They are discussed below:
o Tariffs: A duty or tax, levied on goods brought into a country. Tariffs can be used
to discourage foreign competitors from entering a digestive market. Import tariffs
are two types-protective tariffs and revenue Tariffs.
o Quotas: A limit on the amount of a product that can leave or enter a
country.
o Embargoes: A total ban on certain imports or exports.
4. Boycotts: A government boycott is an absolute prohibition on the purchase and
importation of certain goods from other countries. For example, Nestle products were
boycotted y a certain group that considered the way nestle promoted baby milk formula
to be misleading to mothers and harmful to their babies in fewer development countries.
5. Standards: Non-tariff barriers of this category include standards to protect health, safety
and product quality. The standards are sometimes used in an unduly stringent or
discriminating way to restrict trade.
6. Anti-dumping Penalties: It is one kind of practice whereby a producer intentionally sells
its products for less than the cost of the product in order to undermine the competition
and take control of the market.
7. Monetary Barriers: There are three such barriers to consider:
o Blocked currency: Blocked currency is used as a political weapon is response
to difficult balance payments situation. Blockage is accomplished by refusing to
allow importers to exchange their national currency for the sellers currency.
o Differential exchange rate: The differential exchange rate is a particularly
ingenious method of controlling imports. It encourages the importance of goods
the government deems desirable and discourage importation of goods the
government does not want. The essential mechanism requires the importer to
pay the varying amount of domestic currency for foreign currency with which to
purchase products in different categories. Such as desirable and less desirable
products.
o Government approval for securing foreign exchange: Countries experiencing
severe shortages of foreign exchange often use it. At one time or another, most
Latin American and East European countries have required all foreign exchange
transactions to be approved by the central bank. Thus importers who want to buy
foreign goods must apply of ran exchange permit that is permission to exchange
an amount of local currency for foreign currency.

5.1 DEFINITION OF 'ABSOLUTE ADVANTAGE'


The ability of a country, individual, company or region to produce a good or service at a lower cost per
unit than the cost at which any other entity produces that good or service.Entities with absolute
advantages can produce something using a smaller number of inputs thananother party producing the
same product. As such, absolute advantage can reduce costs and boost profits.In economics, the principle
of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more
of a good or service than competitors, using the same amountof resources. Adam Smith first described the
principle of absolute advantage in the context of international trade, using labor as the only input.Since
absolute advantage is determined by a simple comparison of labor productivities, it
is possible for a party to have no absolute advantage in anything; in that case, according to thetheory of
absolute advantage, no trade will occur with the other party. It can be contrasted withthe concept of
comparative advantage which refers to the ability to produce a particular good at alower opportunity cost.
5.2 ORIGIN OF THE THEORY
The main concept of absolute advantage is generally attributed to Adam Smith for his
1776 publication An Inquiry into the Nature and Causes of the Wealth of Nations in which hecountered
mercantilist ideas. Smith argued that it was impossible for all nations to become richsimultaneously by
following mercantilism because the expor
t of one nation is another nations
import and instead stated that all nations would gain simultaneously if they practiced free tradeand
specialized in accordance with their absolute advantage. Smith also stated that the wealth of nations
depends upon the goods and services available to their citizens, rather than their goldreserves. While there
are possible gains from trade with absolute advantage, the gains may not bemutually beneficial.
Comparative advantage focuses on the range of possible mutually beneficialexchanges

CLASSIFICATION OF BRANDS:
Brand can be classified in different types on different basis such as on the basis of
ownership, on the basis of market area and on the basis of number of product

1. Types of brand on the basis of ownership

On the basis of ownership, brand can be divided in two as follows:

a. Manufacturer's brand

If the manufacturing firm itself gives brand name to its products, it is called manufacturer's brand.
Ownership of such brand lies with manufacturer.

b. Middleman's brand
Some producers sell their products to middlemen, wholesalers and retailers without branding.
Wholesalers or retailers sell such products giving seal of own brand name. This is called
middleman's brand.
2. Types of brand on the basis of market area
On the basis of market area, brand can be divided as follows:

a. Local brand
If supply of product is limited to local level, and the brand is only in local area, such brand is called
local brand. This type of brand is used for the products sold or supplied to limited area. Such type of
brand is also called regional brand.

b. National brand
The products which are sold or supplied to all over the nation with only one named seal, this is called
national brand.

3. Types of brand on the basis of number of products


On the basis of number of products, brand can be divided as:

a. Family brand
If a producer/manufacturing company gives same brand name to its different products, this is called
family brands. If a company produces different products of different nature, types and classes, it
gives same brand name to the products of same class.

b. Individual brand
The brand name used for only one product is called individual brand. Even if the products are of
same class, but different brand names are used for different products, such brands are called
individual brand