Tools Used to Control International Trade and Protect Local Industries

Countries often employ various tools to control their international trade, protect domestic industries, and regulate the flow of goods across borders.

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Countries often employ various tools to control their international trade, protect domestic industries, and regulate the flow of goods across borders. These tools are designed to safeguard the interests of domestic businesses, support local production, and manage economic relationships with other nations.

Some of the tools countries use to control international trade and protect industries are tariff, import quota, import licence, exchange control, embargo imposition, reduction of excise duty, import monopoly, and currency devaluation.

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Read: Differences and Similarities between Internal Trade and International Trade

Tariff

A tariff is a tax imposed on imported goods. It increases the cost of imported products, making them less competitive compared to locally produced alternatives. Tariffs generate revenue for the government and encourage consumers to choose domestic goods.

Import Quota

Import quotas set limits on the quantity of specific goods that can be imported during a particular period. This control mechanism ensures that domestic industries aren’t overwhelmed by foreign competition, allowing them to maintain market share and stabilize prices.

Read: International Trade: Types, Problems, Advantages, and Disadvantages

Import Licence

An import licence is a government-issued permit required for importing certain goods. It allows authorities to track and regulate the entry of specific products into the country. This enables better management of trade and ensuring adherence to trade policies.

Exchange Control

Exchange controls involve regulating the conversion of domestic currency into foreign currency. This control mechanism can limit the availability of foreign currency, which in turn affects the ability to import goods.

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Embargo Imposition

An embargo involves a complete ban on the import or export of specific goods from or to certain countries. Embargoes are often imposed for political or economic reasons. This restricts trade and influences international relations.

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Reduction of Excise Duty

Governments may reduce or waive excise duties on domestically produced goods to make them more competitive against imported products. This measure supports local industries by reducing the tax burden on their output.

Import Monopoly

A government may grant exclusive rights to a single entity for importing specific goods. This monopoly allows authorities to control the entry of certain products, regulate prices, and ensure adherence to quality standards.

Devaluation

Devaluation involves intentionally lowering the value of a country’s currency relative to other currencies. This makes exports cheaper and imports more expensive, thereby boosting domestic industries and reducing imports.

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