By Nandini Choudhary, REDI Intern
You are an American entrepreneur looking to trade internationally. There are many considerations that come into play when deciding upon which countries and markets to enter, including the culture and consumer habits of that nation, the laws and regulations, as well as the currency risk, to name a few. And then there is the big one that can make or break your ability to penetrate the market of the foreign country.
International trade faces the biggest risk on account of trade barriers imposed against imports. Every country, including the United States, has its own specific trade barriers that are put in place to encourage citizens to buy domestic over foreign. This method protects national producers from foreign competition, effectively shielding them from losing too much business.
So what exactly are these trade barriers, and how can you identify the forms in which they present themselves?
Mr. Dharmendra N. Choudhary, the Foreign Trade Counsel at the law firm GDLSK in Washington D.C., spells out the two types of barriers this way:
1. Tariff Barriers
- A duty which foreign governments impose on imports into their country that they believe are priced below the market value for that item
- Countervailing Duty Measures
- Trade import duties that are meant to neutralize the negative effect of the imports of subsidized products on domestic producers
- Safeguard Duties
- Measures taken by countries who believe their domestic industry is threatened by an influx of imports, wherein they implement a temporary restraint on international trade
2. Non-tariff Barriers
- These barriers are generally imposed in the garb of technical requirements for imported goods. They don’t involve taxes or duties in the way that tariff barriers do, but instead, involve policy measures that impact the trade flows in other ways. Examples of such barriers include import quotas, intellectual property laws, financial protectionism, and domestic subsidies.
While international trade seems daunting on the surface, the benefits of conducting it far outweigh the risks. The gains from trade benefit all parties, as long as the opportunity cost of production is kept in mind. So the next time you have the opportunity to trade internationally, keep these risks in mind, but go for it!
Nandini Choudhary is a rising senior at the University of Maryland, College Park and is currently interning with Rockville Economic Development Inc. She is majoring in Finance in addition to a minor in Asian American Studies, and hopes to work in the fields of international trade and consulting after graduation.