OBSTACLES AND CONSTRAINTS IN INTERNATIONAL TRADE

OBSTACLES AND CONSTRAINTS IN INTERNATIONAL TRADE

International trade faces lot of hurdles discussed as under:

 

Trade Restrictions 

Trading nations tend to impose restrictions, partial or complete on imports to safeguard their local industries. If, however, imports are allowed they impose heavy custom duties to discourage their import or make them costlier than the local goods. The imposition of restrictions is aimed at avoiding competition, saving foreign exchange, and controlling balance of trade. However, this negative aspect is being averted by the regime of WTO and its globalization policy.

 

Difference of the Language

The language difference is a major block in foreign trade. Uneducated people in particular find it difficult to make contacts face to face or through letters. However, English and French languages as mediums of expression have solved this problem to a great degree. Uneducated businessmen may hire those who know these languages.

 

Different Monetary Systems

Every country holds its own peculiar currency system and issues currency under it different from others. One country is not willing to accept he currency of the other. Consequently, foreign receipts and payments become difficult to settle. In fact, absence of gold and silver as mediums of exchanges has created this problem. Fortunately, some currencies backed by their countries’ strong economies have assumed the status of international currencies which are readily acceptable by all trading nations, examples being dollars, pounds, euros, marks, yens and now yens too.

 

Cost of Transportation

Transportation cost adds to the price of foreign goods. The greater the distance the higher will be the transportation cost. Moreover, foreign trade is also time-consuming. From ordering to receiving a shipment from an overseas country takes at least a month.

 

Miscellaneous Barriers

Other barriers include differences in weather, economic, social, psychological, legal and other environmental conditions making foreign trade more difficult. One country may be running on 240 volts while others on 120 volts and so on, In VCR and TV the US has adopted NTSC system, in Pakistan it is PAL. Cold countries refrigerator will be useless in tropical countries until it is tropicalized to adapt to the climate. Once these hurdles are removed the foreign trade can be smoothed.

 

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