Nontariff distortions to trade

Along with tariffs, international trade is distorted by a number of nontariff barriers to trade. The chapter begins with the analysis of quotas and how they influence economic welfare. In addition to quotas, other nontariff barriers to trade such as industrial policy, technical barriers to trade, subsidies, and government procurement are covered. The final part of the chapter contains information on corruption, economic sanctions, labor and environmental standards, and transportation costs. The chapter concludes with a discussion of how the gravity equation is used to estimate international trade flows. The chapter starts with the analysis of quotas and how they influence economic welfare. In addition to quotas, other nontariff barriers to trade such as industrial policy, technical barriers to trade, subsidies, and government procurement are covered. In the first part of the chapter, people will learn about quotas, which provide domestic firms with a more certain form of protection. In the second part of the chapter, authors discuss ways in which governments attempt to protect domestic industries without being so obvious about it. The existence of transportation costs constitutes implicit form of protection for domestic producers, and in the last section of the chapter they consider transportation costs and how they affect international trade. The Nontariff Distortions are becoming increasingly important in world economy. As explicit trade barriers are reduced worldwide, these other nontariff distortions of trade are becoming relatively more important. The chapter concludes with discussion of how the gravity equation is used to estimate international trade flows.