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An Essay By
Nyambe E.N
Student, School of Law, University of Zambia,
Lusaka, Zambia.
emmanuelnyambe52@gmail.com
Global trade has expanded over the years to keep up with the ever-increasing worldwide consumer needs. A lot of nations have adopted more complex trade arrangements that allow them to enjoy the advantages of trading with other nations. On its onset in the ancient time, global trade was simply trading over long distances, by then the concepts of nations was not yet realized for it to be termed the way it is in this modern era. However, in this era this trade is not entirely free, many countries over the world have introduced trade barriers, for instance, nations have subsidized certain local industries to disadvantage foreign markets, introduced anti-dumping regulations to halt product dumping and imposed taxes and tariffs to imported goods to generate public revenue, these barriers can be quotas, tariffs and Non-tariff barriers. Although trade barriers protect citizens interest in their respective countries social, economic, political activities, they bound growth and lead to poverty by limiting the choice of products, promoting overproduction through subsidies and they restrict jobs in countries that play a big role in the global supply chain.
Trade barriers curb the choices of products citizens within a country can opt for. Restraining the choice of products robs poor people of lower-priced or better-quality goods imported elsewhere by obligating them to pay higher domestic prices and accept inferior quality. This in turn can cause unprecedented inflation levels to increase. And When there is high inflation in a nation according to Maye (2019) “People with higher incomes can offset rising inflation with rising incomes. Sadly, though, income inequality and rising inflation can entrap lower-income households in poverty”.
Trade barriers promote overproduction through subsidies. subsidies are governmental fiscal grants from public funds to industry to keep the prices of the services or goods it produces at a low price. And When industries goods and services are subsidized, they become abundant and a need to dispose of them comes about. Subsidizes goods, for example, Agriculture equipment and inputs in a particular country is likely to lead to overproduction and dumping on the global market and this, in turn, affect nations that cannot impose such subsidies to protect their farmers, and these farmers yields reduce over time due to low prices on the global market. this reduces the future yield of these farmers who have incurred a loss on the global market and this, in turn, leads to the decrease in their contribution to the national food basket, therefore, poverty in their nation increases. Furthermore, protecting the infant industries through subsidies reduces these industries efficiency and their likelihood to mature to accomplish comparative advantage against foreign markets. Over time supporting these industries becomes an expensive liability for the government at the expense of providing education and health services for the poor (Guarino 2018).
Trade barriers constrain jobs in developed and developing countries that are active in the global supply chain. these nations depend on global exports to particular export destinations to create jobs for their citizens and if these destinations that the countries suppliers’ goods and services to, impose trade barriers, most of these countries infant industries close down or lay off some of their employees (Kühn & Viegelahn). In a situation where citizens in the country do not have enough jobs or get low wages poverty is likely to increase, to survive jobless folks have no other choice but to engage in the informal sector. And as the informal sector of a country increases generating income for its Gross Demotic Product (GDP) reduces thus economic growth is affected. Furthermore, these barriers can also promote losses of unemployment even in developed countries that impose them and lead to negative impacts on economic growth. For instance, in the United State of America (USA) in 2002 imposed steel tariffs that led to a lot of American steelworkers losing their jobs as steel prices got high in the industry (York 2018).
To sum up, trade barriers even though established directly or indirectly, they cause economic inefficiency in a nation and lead to drastic poverty levels as they limit consumers a choice of goods and services, promote overproduction through subsidies, constrain jobs in countries that are active in the global supply chain. And for any country to alleviate poverty and have a prosperous economy a need to carefully open up their trade with the help of international organisations like the World Trade Organisation in gulding how they should open it is up is ideal.
Bibliography
Guarino, A.S. (2018) The Economic Effects of Trade Protectionism. Focus Economics Available at: https://www.focus-economics.com/blog/effects-of-trade-protectionism-on-economy. [Accessed 19 July 2021]
Johnston M. 2019. A Brief History of International Trade Agreements. Investopedia. Available at: https://www.investopedia.com/articles/investing/011916/brief-history-international-trade-agreements.asp. (Accessed 19 July 2021).
Jordan, N. (2019) Trade Barriers and their influence on global poverty. Borgen Magazine. Available at: https://www.borgenmagazine.com/trade-barriers-and-their-influence-on-global-poverty/. (Accessed 19 July 2021).
Kühn, S. and Viegelahn, C. (2017) Foreign trade barriers and jobs in global supply chains. ILO Research Paper No. 19.
York, E. (2018) The impact of trade and tariffs on the United States. Tax Foundation. Available at: https://taxfoundation.org/impact-of-tariffs-free-trade/. (Accessed 19 July 2021).