With each type of trade barrier, who is affected? How does each policy affect prices and jobs? BARRIERS TO TRADE Definitions: Barriers to Trade: Policies that restrict the free flow of goods and services between countries; types commonly used are tariffs, quotas, export subsidies, and standards. Tariff: Tax on imported goods or services; a tariff may be used to raise revenues for the government imposing the tariff, but is more commonly used to reduce consumption by domestic consumers of the imported good or service. A tariff increases the price of an imported good, thus making the good less attractive to consumers than a less expensive domestic good. Quota: Limit on the amount of an imported good allowed into the country during a given period of time (i.e., one year); a quota reduces not only the amount of imported goods available but also the total amount of that good available; when supply is decreased, price increases for the consumer; thus, a quota, like a tariff, raises the prices of the good for consumers. Export Subsidy: Government financial assistance to a firm that allows a firm to sell its product at a reduced price; this makes the product more competitive when exported to other countries. Consumers (both at home and abroad) benefit from lower prices but the subsidy is paid for by taxpayers in the country providing the subsidy. Product Standards: A type of "hidden" trade barrier; most countries set their own standards for product safety, content, packaging, etc.; if a standard for a product differs in Country A from the standards of Country B, firms in Country B will spend additional money in production to meet the standards of Country A if they want to export their product there, this addition to the cost of production will make their product more expensive for consumers in Country A to buy and will encourage consumers there to buy domestic (Country A) products instead. Consumers in Country A will pay higher prices for these goods than they would without a trade barrier.