Agricultural trade barriers are contentious issues between developing and developed economies.
Trade barriers, including tariffs, subsidies and quotas, are used by countries with the intention of protecting domestic industries. In an increasingly globalized economy, most countries are choosing to dismantle trade barriers and implement free-trade policies. The World Trade Organization and most mainstream economists support free trade as the system most conducive to economic growth. However, under certain circumstances, trade barriers can be used selectively to favor key industries, maintain domestic employment levels or increase government revenue.
Infant Industries
Countries will often offer trade protections to new industries to allow them to develop in a less competitive environment. An infant industry tariff or subsidy would allow new businesses to develop process and technology that would eventually allow them to compete in a free international market. This type of trade barrier is often used by less-developed countries wanting to diversify their economies to be less dependent on agriculture. Infant industry protections also provide these countries with the time to develop worker skills that may be absent initially.
Level Playing Field
A country may implement trade barriers to create a more equal market for domestic businesses as compared to the international competition. For instance, in a free trade environment where imports are not taxed, a country must rely more heavily on domestic business for tax revenues. In such cases, an import tariff may serve to decrease market distortion as opposed to increasing it. Similarly, a government may choose to have a variety of domestic regulations relating to the environment, child labor, working standards, minimum wage or collective bargaining. These governments may choose to tax imports from countries that avoid the same standards to equalize cost factors.
Ensuring National Security
A government may choose to protect industries that are essential to national security. During periods of peace and economic growth, international trade tends to flow unimpeded. As a result the source of products and services, whether domestic or international, may appear to be unimportant. However, during times of conflict or economic crisis, raw materials and key products may become hard to acquire in the international market. Therefore, a country may choose to protect key domestic industries relating to natural resources, agriculture and defense.
Tax Revenue
Import tariffs can be useful sources of tax revenue for the governments, especially when applied to non-essential products such as luxury goods. Tariffs on imported luxury goods can act as a form of progressive taxation, as money is diverted from international corporations and high income consumers. The government can then use this money to improve infrastructure or offer services domestically. From an economic standpoint, tariffs for the purpose of tax revenue are best implemented in peripheral areas of the economy that do not affect the majority of consumers.
