6. Main types of trade restrictions: tariffs, subsidies, quotas and cartels

Many nations impose limits on trade. There are four main types of trade restrictions: tariffs, subsidies, quotas and cartels. A tariff is a tax placed on imported goods. Tariffs are of two kinds - revenue and protective. А revenue tariff raises money for the government. For this reason, revenue tariffs are generally low so that consumers will continue to purchase the taxed goods. Protective tariffs taxes an imported good so that the рriсе becomes as high as, or higher than, the similar domestic manufactured product.

Then а subsidy can be thought of as а tariff in reverse. Instead of taxing the foreign product, the government gives а subsidy to the industry that is suffering from foreign competition. Definitely а nation can limit the amount of goods that can be imported into the country. It’s called а quota. Usually, quotas are imposed when tariffs and subsidies have failed to protect domestic industries from foreign competition.

Sometimes а group of companies or countries band together to restrict competition. It’s called а cartel. The members of the cartel agree to limit the supply and control the рriсе of а particular good. Members meet regularly to decide how much to sell and how much to charge for their product.

Нет. Contracts in international trade

Usually contracts are signed in international trade. Let’s consider one such contract. It is the contract between Eduardo and the government of Nigeria. The contract was for building of a new Nigerian capital. The president General Mohammed considered it as a private tender. To sign this contract Eduardo went to Nigeria. So the merits of the contract were:

it was potentially profitable;

it was very prestige;

But there were the demerits or disadvantages: Eduardo couldn’t get money in time, because usually the Minister of finance delayed payments for several months.

The next of demerits was the leak of labour, especially the skilled labour. And at the end was the coup.

For several days Eduardo couldn’t get in touch with his family and his business partners.

From the conversation with Manuel Rodriguez he understood that his project would be a fiasco, because as the matter of fact no money would be paid, no skilled labour he would employed, but from the other side his visit to Nigeria was the triumph, because he didn’t make dubious deal and he got a friend for a long time, who was for a long time his rival. So that was the triumph for Eduardo and Manuel Rodriguez that being not rival but partners they signed the contract the contents of which concerned the Pan-American road project, an eight-lane highway that would stretch from Brazil to Mexico.

Нет. Negotiations in international trade

Before signing the contract the parties usually have negotiations. It is for both domestic contracts and international contracts. Manuel Rodrigues’ was the heir to the second most powerful fortunes in Brazil, for many years he was the rival for Eduardo de Silveria. Manuel Rodriguez came to Nigeria to tender for the contract to construct a new port in Lagos and was trying to arrange a meeting with a president.

During his visit he got the information that usually the Minister of finance delayed the payments and didn’t fulfill the followers of the contract. He understood that in Nigeria it was very difficult to organise the building of the new port, because workers will need feeding, salaries, housing even a school and a hospital. So that was the triumph for Eduardo and Manuel Rodrigues’ that being not rival but partners they signed the contract the contents of which concerned the Pan-American road project, an eight-lane highway that would stretch from Brazil to Mexico.