Why Are Trade Barriers Effective

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A report on the topic TRADE BARRIERS- HOW EFFECTIVE? Date – 14th December 2014 Submitted to: Prof. Abha Rishi ITO Submitted By: Pranav Kesari Sec – C Roll No. – 13DM131 Trade barriers- how effective? In this article I will touch upon the following questions? 1. What are trade barriers? 2. Who implements trade barriers? 3. Why are trade barriers implemented? 4. What are types of trade barriers? 5. Who are the beneficiaries of trade barriers? 6. How does it affect the society and economy? 7. What should be the policies for a successful trade barrier implementation in India? What are trade barriers? In a very simplistic layman definition the trade barriers can be describes as, restrictions a government; in this case the Indian government;…show more content…
A tariff is a tax, and hence the government enjoys greater revenues as imports increase. Domestic industries on the other hand benefit from the reduction in competition, as the tariffs artificially increase the prices of imported products. But unfortunately for consumers – and I mean both, the individual consumers and businesses - higher import prices result in higher prices for goods. For example if the prices of steel in India is inflated due to tariffs, an individual consumers will have to pay more for products like cars which use steel, and automobile manufacturers like Tata will have to pay more for steel to make cars. How does it affect the society and economy? The effects of tariffs and trade barriers on any of the stakeholders- businesses, consumers or the government is not a permanent one, it shifts over time. It is evident that in the short run, the higher prices for goods can reduce consumption by individual consumers and by businesses. During this time period, businesses will profit and the government will see an increase in revenue from duties. However, in the long term, businesses will notice a decline in efficiency due to the lack of…show more content…
Because of this reason some of the countries see India as a ‘rapid globalizer’ while other countries still see it as a ‘highly protectionist’ economy. After Independence in 1947 and till the early 1990s, India was a closed economy, with average tariffs exceeding 200 percent, and having extensive quantitative restrictions on imports, foreign investment was under very stringent restrictions. The country began to cautiously reform in the 1990s, liberalizing only under conditions of extreme necessity. Since that time, trade reforms have produced remarkable results. India’s trade to GDP ratio has increased from 15 percent to 35 percent of GDP between 1990 and 2005, and the economy is now among the fastest growing in the world. Average non-agricultural tariffs have fallen below 15 percent, quantitative restrictions on imports have been eliminated, and foreign investments norms have been relaxed for a number of

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