International Trading Environment

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International Trading Environment

International trade, accounts for the major part of the international business. Certain other forms of international business, like international investment, may also be affected by international trade. The international trading environment is, therefore, a very important factor affecting international business. The international trading environment includes important factors such as trade barriers, trade agreements, trading blocs, cartels and multinational trade negotiations.

Trade Barriers

One of the most important feature sot he international trading environment is the proliferation of the trade barriers. The main objectives of imposing trade barriers are to protect domestic industries from foreign competition, to promote indigenous research and development, to conserve the foreign exchange resources of the country, to market the balance of payment position favorable, to curb conspicuous consumption, to mobilize revenue for the government and to discriminate against certain countries. There are, broadly. two types of trade barriers viz., tariff barriers and non-tariff barriers.


Tariffs in international trade refer to the duties or taxes imposed on internationally traded goods when they cross the national borders.

Non-tariff barriers

Non-tariff barriers (NTBs), some of which are described as new protectionist measures (as against tariffs which are regarded as traditional barriers), have grown considerably, particularly since around the beginning of the 1980s. The export growth of many developing countries has been seriously affected by the NTBs.

Type of NTBs

The NTBs are of two categories. The first category includes those which are generally used by developing countries to prevent foreign exchange outflows or result from their import licensing, import quotas, foreign exchange regulations and canalization of imports.

The second category of NTBs are those which are mostly used by developed economies t protect domestic industries which have lost international competitiveness and or which are politically sensitive for governments of these countries. One of the most important new protectionism measures under this category is the voluntary export restraint (VER).

A brief account of Quotas which is an important NTB is given below:


Quantitative restrictions which take the form of quotas is very important traditional means of restricting imports and exports. The impact of quota is drastic in comparison with tariffs. Economists, therefore, normally prefer tariffs to quota.

The aim of import quota, obviously, is to restrict the quantity of imports. The quantitative restriction may be to protect the interests of the domestic producers or to conserve foreign exchange resources.

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