Trade Barriers and Government Legislation

Other Trade Barriers

• Countries sometimes can't use tariffs or quotas due to trade agreements or trade bloc memberships.
• They might employ alternative methods to safeguard domestic industries from cheap imports.
• These methods include legislation like rules on safety, fakes, and toys.

Government Legislation

• Government legislation acts as a strong tool to prevent counterfeit goods from entering the country.
• For example, in the UK, imported toys must carry CE marks, a sign that it adheres to EU safety regulations.
• This measure instils trust in consumers that the goods are authentic.

Drawbacks of Government Legislation

• Not all imports can be thoroughly checked for authenticity.
• A small percentage (2%) of imports are fake, according to the OECD.
• Organized crime can exploit loopholes in preventing fake imports, targeting various sectors like medicine, machinery, and clothing.

Subsidies

• A subsidy is a payment from a government to a producer to keep the price of a particular good low, thus protecting it from imports.
• Domestic subsidies benefit producers by driving down their costs and making domestic goods more competitive in the country's market.

Domestic Subsidies: Benefits

• Businesses are stimulated to increase production, leading to more jobs and higher tax revenue for the government.
• Domestic producers receive an advantage when exporting goods to emerging markets, like BRICS or MINT nations.
• Economic scale benefits arise from greater production, enabling businesses to leverage their production volume.

Domestic Subsidies: Drawbacks

• Protectionist practices in the form of subsidies may invite retaliatory tariffs or quotas from other nations.
• Subsidizing businesses may foster activities that would be unprofitable without government intervention, promoting inefficiency in some cases.

Research: CE Mark

• Understand the CE mark on toy labels.
• Assess the efficiency of the legislation to restrict imports of cheap toys in the UK.
• Investigate the countries this legislation targets regarding imported toys.
• Identify the Toy Safety Directive.

Research: Subsidized Industries

• Identify the industries in the UK that receive government subsidies.
• Analyze the effectiveness of subsidies in shielding these industries from cheaper imports.
• Evaluate the benefits these industries experience from protectionist measures.

Explore the various trade barriers that countries employ beyond tariffs and quotas, including legislation aimed at preventing counterfeit goods. This quiz also delves into the role of subsidies in supporting domestic industries and the challenges posed by organized crime in the import sector.