Trade restrictions: tariffs, subsidies, quotas and cartels. How trade restrictions affect international trade. (Environment, 1.6)

Many nations impose limits on trade. There are four main types of trade restrictions: tariffs, subsidies, quotas and cartels. The tariff is a tax placed on imported goods. Tariffs are of two kinds - revenue and protective. A revenue tariff raises money for the government and they are low, so consumers will continue to purchase the taxed goods. Protective tariffs make imported products more expensive and encourage people to buy goods produced in their own country

A subsidy is a tariff in reverse. The government gives a subsidy to the industry that is suffering from foreign competition.

A nation also can limit the amount of goods that can be imported into the country. It's called a quota. Usually, quotas are imposed when tariffs and subsidies couldn’t protect domestic industries from foreign competition.

Sometimes a group of companies or countries band together to restrict competition. It's called a cartel. The members of the cartel agree to limit the supply and control the price of a certain good. Members meet regularly to decide how much to sell and how much to charge for their product.

It's better for nation to use tariffs, because they provide domestic job protection and aid industrial development. Also tariffs are important to the national defense.

Trade restrictions limit world trade, reducing the total number of goods and services produced. Trade restrictions also raise prices.

That's why there is an international organization as GATT (General agreement on Tariffs and Trade), which members met periodically in an effort to lower tariffs and settle trade disputes.

13. International Trade Organisations & Agreements. (Environment, 1.6)

Thе World Trade Organization came into being in 1995. The WTO is the successor to the General Agreement on Tariffs and Trade (GATT). GATT and the WTO have helped to create a strong and prosperous trading system.

The main purpose of WTO is to help trade flow freely, fairly, and predictably. It does by:

Administering trade agreements

Acting as a forum for trade negotiations

Settling trade disputes

Assisting developing countries in trade policy issues, through technical assistance and training programmes.

Cooperating with other international organizations

The WTO has more than 130 members, accounting for 90% of world trade. Over 30 others are negotiating membership. Decisions are made by the entire membership and by consensus.

The WTO’s agreements have been ratifies in all member’s parliaments. The WTO’s top level decision-making Body is the Ministerial Conference which meets at least once every two years. The General council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development and so on.

Europe has a well-developed financial sector. Many European cities are financial centres with the City of London being the largest. The European financial sector is helped by the introduction of the euro as common currency. This has made it easier for European households and firms to invest in companies and deposit money on banks in other European countries. Exchange rate fluctuations are now non-existent in the Eurozone.

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