Trade protection instruments are those barriers that aim to limit international transactions. They are protectionist measures used by governments to protect their industry from external competition.
These trade protection instruments can be classified into two types:
- Tariff protection instruments: the tariff is a tax that taxes goods that are subject to international trade as they pass through the customs border. The tax can be set on both imports and exports, although the most common is taxing imports.
- Non-tariff protection instruments:we can highlight the following:
- Tariff quotas or import quotas: theyconsist of limiting imports of a good in quantity or value during a given period. The big difference with the tariff is that with this one the desired amount can be acquired as long as one is willing to pay it, while with a quota the amount that can be acquired is limited by a commercial policy decision. You can also set a lower import tariff for a specific number of merchandise units and a higher tariff for imports that exceed that number.
- Subsidy to production: theyconsist in subsidizing national production, so that, when lowering production costs, the starting price is more competitive towards abroad.
- Tax on the consumption of imported goods:its effect is to reduce the consumption of an imported good, without affecting production. Point out that the joint effect of a consumption tax and production subsidy is identical to the tariff (stimulates national production).
- Export subsidies:The Government pays its companies to increase their exports.
- Multiple changes:the parity of a currency is fixed according to the merchandise imported or exported.
- Control of changes:when the government rations the currencies to the import.
- Minimum domestic content:A requirement that a percentage of the content of a product must be national.
- Voluntary exportrestrictions : a country restricts the export of products, especially with the intention of avoiding tariffs or fees imposed by the trading partner.
- Administrative protectionism: theseare administrative rules (provisions of customs regulations) that hinder the entry of foreign products. They may be:
- Quality controls
- Sanitary controls
- Rules on trademarks and patents
- Bureaucratic barriers such as import licenses or non-automatic licenses.
- Performance requirements:certain obligations are imposed on producers of goods and services, such as forcing that a proportion of their production be exported
- Deferral programs and refund of tariffs.