International trade connects buyers and sellers across national borders, but several obstacles can make that exchange difficult or expensive. This lesson introduces natural barriers, which arise from physical or cultural conditions, and tariff barriers, which governments create by taxing imports.
Natural barriers are obstacles related to geography or differences between people and cultures, rather than policies designed to restrict trade.
All flashcards
What is a natural trade barrier?
A physical or cultural condition that makes trade more difficult or costly, such as distance, transportation challenges, or language differences.
How can distance act as a trade barrier?
Long distances can increase shipping time and transportation costs. Those additional expenses may make a product too expensive to sell profitably in the destination market.
How can language differences disrupt trade?
They can make it harder for businesses to negotiate, understand contracts, communicate orders, and provide accurate shipping instructions.
What is a tariff?
A tariff is a tax imposed by a nation on imported goods. It may be charged per unit, as a percentage of value, or through a combination of methods.
What are two potential effects of a protective tariff?
It can make imports less attractive and support domestic producers, but it can also raise prices for consumers and costs for businesses that use the imported product.
Quiz questions
What does an import quota do?Answer: It sets a limit on the quantity of a particular good that may be imported.
How does an embargo differ from an import quota?Answer: An embargo completely bans specified imports or exports rather than setting a quantity limit.
What is the purpose of a buy-national regulation?Answer: It gives domestic suppliers an advantage in certain purchases or public projects.
How can differing customs requirements act as trade barriers?Answer: They can require foreign sellers to change products or packaging to enter the market.
How can exchange controls limit a firm's ability to import?Answer: They let a government regulate how much foreign currency businesses can obtain.
Based on Introduction to Business 2e by Lawrence J. Gitman, Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, James C. Hyatt (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.