Trade Barriers: Effects on Growth and Development of Countries

Running head: TRADE BARRIERS
Trade Barriers
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TRADE BARRIERS
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Introduction
Government imposes trade barriers in order to boost economic output and efficiency and
to protect the domestic economy of a country. The effects of trade barriers on the growth and
development of a country are significant (Alharbi, 2014). It adversely affects the economic
output and employment generation. Even though Saudi Arabia is open to trade, it imposed some
regulations on the US to protect the domestic firms of the country. As a result, the domestic
economy of Saudi Arabia has protected from the exploitative US firms. However, the growth of
US economy hampered and size of the economy reduced.
Body
Restrictions imposed by the government on international trade is called trade barriers. To
protect domestic industries, government imposed additional limits or costs on imports and
exports. Imposition of restriction on trade increases the availability or value of the traded goods.
Trade barriers are of three types such as Quotas, Non-Tariffs and Tariffs. Generally, trade
barriers are counterproductive and reduce economic efficiency of the countries (Alkhateeb,
Mahmood & Sultan, 2016).
There are several reasons behind imposition of trade barriers such as protection against
other countries, protection of infant or growing industries, protecting domestic jobs, retaliation,
to increase demand for domestic goods and avoid unemployment. Large number of foreign
competitors hamper the growth of the infant or growing industries. In addition, existence of
domestic industries are threatened by the expanded competition from imported products, which
creates unemployment. Trade barriers decrease the competition from import products and

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increase the demand for domestic products (French, 2016). It defends a country from the
exploitative countries because the dumping system is detrimental for the growth of a nation.
The erection of trade barriers shift resources from more efficient economic activity to less
efficient economic activity and increase prices (Hornok & Koren, 2015). The employment and
output of a country declines, as restrictions imposed on trade increased costs for consumers and
producers. As a result the income of consumers and producers both reduce and leading to
economic downturn. Alternatively, it also appreciate the currency value of exploitative country
and induce the costs of goods sold in the international market by the exporters. The negative
impacts of the trade barriers are measured with the help of comparative advantage theory.
Sometimes, it fails to achieve the desired outcome and causes turmoil in the global market of
trade. It indicates that negative effects of trade barriers subsides the short term benefits it
brought.
Although, the market of Saudi Arabia is predictable and open to trade, various market
barriers were imposed by the Saudi Arabian government (SAG) on firms of United States. The
barriers were imposed in the areas includes localization and performance requirements, technical
regulations and standards, the Arab league boycott, delayed payments, intellectual property
rights protection and dispute resolution. It imposed technical regulations on US firms, developed
by the Gulf Standards Organization (GSO) and the Saudi Arabia Standards Organization
(SASO). It created vital access restrictions for consumers and industrial goods exported from the
US (Li & Beghin, 2017). Therefore, it affected manufacturers of US and leading to reduction of
exports.
The US firms are asked to purchase local content by the government controlled firms of
Saudi Arabia. Imposition of such restriction to enhance revenue generation of local firms