Tariffs and other trade restrictions are part of a country’s legal structure.
An import tariff is a tax levied by a nation on imported goods.
1) A fixed tariff is a specific amount of money levied on each unit of
product brought into the country.
2) Countries sometimes levy tariffs for political reasons.
3) Import tariffs are more commonly employed to protect domestic
products by raising the price of imported ones.
Exchange controls restrict the amount of currency that can be bought or
sold.
d. A quota limits the number of units of a particular product that can be
imported into a country.
e. An embargo prohibits trade in a specific good. It may be established for
political, economic, health, or religious reasons.
f. A common reason for setting quotas or tariffs is to prohibit dumping, the
selling of products for less than it costs to produce them.
1) A company may dump its products because it permits quick entry into a
market; the domestic market for the firm’s product is too small to
support an efficient level of production; or because technologically
obsolete products are no longer salable in the country of origin.
Political Barriers
a. Businesses must consider the political instability of the countries where they
want to set up operations: Political unrest may create a hostile or even
dangerous environment for business.
b. Political considerations may lead to the formation of a cartel, a group of
firms or nations that agree to act as a monopoly and not compete with each
other, to create a competitive advantage in world markets.
Social and Cultural Barriers
1. Most businesspeople engaged in international trade underestimate the importance
of social and cultural differences.
2. Differences in body language and personal space may generate uncomfortable
feelings and misunderstanding when businesspeople of different countries
negotiate with each other.
1) Body language is nonverbal, usually unconscious communication
through gestures, posture, and facial expression.
2) Personal space is the distance at which one person feels comfortable
talking to another.
3) Acceptable gestures also vary from culture to culture.
3. The people of other nations often have a different perception of the importance of time.
4. Companies engaged in foreign trade must observe the national and religious
holidays and local customers of the host country.
5. Problems linked to cultural and social differences may be minimized through
research.
