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Trade barrier

From Academic Kids

A trade barrier is general term that describes any government restriction on international trade, the barriers can take many forms, including:

Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade war results.

Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can be explained by the theory of comparative advantage. In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel. Examples of free trade areas are: North American Free Trade Agreement (NAFTA), European Free Trade Association, European Union (EU), South American Community of Nations.

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