How Trade Restrictions Work

Trade restrictions are common all over the world, and they have a significant impact on the trade opportunities of small and large businesses. In this article we talk about the term trade restrictions, how trade restrictions are used and how they can benefit and harm business owners.

What are trade restrictions?

Trade restrictions include all the actions that limit or prevent the trade of products, investments, and establishments. Trade restrictions can be aimed both toward the export and import of goods.

There are several reasons why countries implement trade restrictions. One example is when a country perceives that the competition in a certain industry is too hard from foreign companies. Customs fees and other fees can be implemented to make the foreign products more expensive to import. Another example is when a country deems a foreign product harmful to people’s health. A ban on the product can then be implemented.

It’s common to come across various trade restrictions when importing or exporting between Sweden and, for example, countries outside the EU.

Tariff and non-tariff trade restrictions

Trade restrictions can be divided into tariff and non-tariff trade restrictions. Tariff trade restrictions consist of duties, taxes and fees which must be paid by the importer to the state on products that are imported into the country. Non-tariff trade restrictions consist of rules and quotas that make the import of products more challenging. Here are some examples of non-tariff trade restrictions:

  • Rules and regulations that force products to be adapted in a certain way in order to be imported into the country.
  • Campaigns that influence citizens to buy domestic goods.
  • Difficult bureaucracy to make the import of goods complicated and costly.
  • Subsidies for industries in the country to compete with imported products.
  • The consistent boycott of imported products in the public sector.

Other than trade restrictions, delivery times are important to keep in mind when exporting products to another country. Read more about how long it takes to send a parcel to countries both in and outside of Europe.

Frequently asked questions about trade restrictions

Why do trade restrictions exist despite how they limit trade between countries?

Trade restrictions are used despite their negative consequences to, for example, generate income to the state and to protect the domestic market from foreign competition.

What are the advantages of trade restrictions?

Duties and fees on imported products can be a significant source of income for the state. Many countries also have high fees on food to protect the domestic food production, which can be a lifeline in times of crisis.

What is protectionism?

Protectionism is when countries want to protect their domestic production from the competition of imported services or products. It’s common that countries use both tariff and non-tariff trade restrictions to achieve this goal.