1. Trade restrictions are widespread throughout the world.

Trade barriers consist of tariff restrictions and nontariff

trade barriers.
A tariff is simply a tax (duty) levied on a product when it crosses national boundaries. There are several types
of tariffs: A specific tariff represents a fixed amount of money per unit of the imported commodity. An ad valorem
tariff is stated as a fixed percentage of the value of an imported commodity. A compound tariff combines a specific
tariff with an ad valorem tariff.
The effective tariff rate tends to differ from the nominal tariff rate when the domestic import competing
industry uses imported resources whose tariffs differ from those on the final commodity.
Trade laws mitigate the effects of import duties by allowing importers to postpone and prorate over time their
duty obligations by means of bonded warehouses and foreign trade zones.
The welfare effects of a tariff can be measured by its protective effect, consumption effect, redistributive effect,
revenue effect and terms-of-trade effect. If a nation is small compared with the rest of the world, its welfare
necessarily falls by the total amount of the protective effect plus the consumption effect if it levies a tariff on
imports. If the importing nation is large relative to the world, the imposition of an import tariff may improve its
international terms of trade by an amount that more than offsets the welfare losses associated with the consumption
effect and the protective effect.
Consumer surplus refers to the difference between the amount that buyers would be willing and able to pay for
a good and the actual amount they do pay. Producer surplus is the revenue producers receive over and above the
minimum amount required to induce them to supply the good.
Tariff liberalization is intended to promote free markets.

2. Nontariff trade barriers include: import quotas, orderly marketing agreements, domestic content requirements,
subsidies, antidumping regulations, discriminatory government procurement practices, social regulations, and sea
transport and freight restrictions. An import quota is a government-imposed limit on the quantity of a product that
can be imported. Orderly marketing agreements are market-sharing pacts negotiated by trading nations. Domestic
content requirements try to limit the practice of foreign sourcing and encourage the development of domestic
industry. Government subsidies are sometimes granted as a form of protection to domestic exporters and import-
competing companies. International dumping occurs when a firm sells its product abroad at a price that is less than
average total cost or less than that charged to domestic buyers of the same product (sporadic dumping, predatory
dumping, persistent dumping). Government rules and regulations in areas such as safety and technical standards
and marketing requirements can have significant impacts on world trade patterns.