1. Barriers to Trade
SSEIN2a: Define trade barriers as tariffs, quotas, embargoes, standards, and subsidies.
SSEIN2b: Identify costs and benefits of trade barriers over time
SSEIN2c: List specific examples of trade barriers.

2. What are Trade Barriers?
Any form of governmental or operational activity or restriction that renders importation of some goods into a country difficult or impossible.

3. Tarrifs
Definition: a tax placed on imports to increase their price in the domestic market.
Protective tariff – designed to make domestic products cheaper than their foreign made rivals.
The goal is to make the imported good more expensive
Revenue tariff – generates revenue for the government without making the product more expensive than the same domestic products.

4. Tariff’s: Costs: Price of goods increases. Reduced competition
Hidden costs of political and cross-industry retaliation.

5. Benefits of Tariff’s Increased sales for domestic (US) goods
Protect young domestic industries from foreign competition.
Protect aging and inefficient domestic industries from foreign competition.
To protect domestic companies from “dumping” from foreign companies or governments.

6. Examples of Tariff’s
In the year 2000, tariff’s were increased 8-30% on imported steel.
Goal was to save jobs in the U.S. steel industry.
Tariff’s are placed on imported cars depending on the value of the car.

7. Quota
Definition: A country limits the product that can be imported from another country

8. Quota: Costs and Benefits
Costs of Quota’s
Shortages
Higher prices
Benefits of Quota’s
Domestic job protection
Domestic industry protection

9. Quota’s: Examples
In 1981, President Reagan put a limit on the number of imported cars that foreign car produces could bring into the United States.
Consumers had fewer cars to choose from
Prices were higher than they would have been without the quota.
Sugar quota’s have been in effect for 50+ years
Limits the amount of imported sugar
Protects U.S. sugar industry.

10. Embargo’s Definition:
An economic sanction to make a political statement
The government completely restricts trade with another country

11. Embargo: Cost/Benefits
Costs:
Loss of imports
Human rights
Prices rise due to lower supply
Benefits
Political leverage
Increase in substitutes

12. Embargo Example: Cuba embargo began in 1963 and still continues today.
No imports or exports allowed
No free travel between the countries

13. Standards Definition:
Laws that promote the health and safety of products and services within the country.

14. Standards: Cost/Benefit
Costs:
Increased cost of inputs
Increased prices
Decreased competition
Benefits:
Safer products
Higher quality products
Recourse against products not made to specifications.

15. Cars must have seat belts Toys cannot be made with lead paint.
Standards
Examples:
Cars must have seat belts
Toys cannot be made with lead paint.

16. Subsidies
Definition: a government payment to an individual, business, or other group to encourage or protect a certain type of economic activity.

17. Subsidies: Costs/Benefits
Protects inefficient industries
When repealed, costs go up and producers leave the market
Benefits:
Lowers the cost of production
Encourages current producers to remain in the market and new producers to enter

18. Subsidies
Examples:
Dairy farmers receive subsidies to help them stay in business.
Research and production of biofuels