Trade Impediments
Trade Impediments
In spite of the advantages that may accrue for firms engaging in importation or exportation, many factors can impede a firm's entry into trading relations, and these in turn affect the full realization of trade among countries. First, a firm's management may have imperfect knowledge of markets in foreign countries and thus be unable to take advantage of the avenues open to the firm. Or a producer might be aware of potential demand in foreign countries but nevertheless not know the mechanics of exporting and distributing in
foreign markets. The process of exporting, after all, involves a whole new set of terminology and institutions. Finally, a company might perceive that exporting or importing is too risky. A potential exporter, for example, may fear that payment will not be forthcoming, that payment will be in a currency that cannot easily be used, or that the competitive environment abroad is too unknown or disorderly. A potential importer may lack the resources to seek out global resources or may fear that supplies are too uncertain given the greater distance between countries and the perceived problems (whether accurate or not) of more strikes and unrest abroad.
Governmental policies might either enhance or retard the movement of trade. Policies to improve imperfect knowledge about the foreign environment might positively increase trade. Direct restrictions on the importation or exportation of goods are obvious barriers. It is safe to say, though, that all governments have policies that both enhance and retard trade. In the Sri Lankan case at the beginning of the chapter, the government sought to remove some marketing imperfections by helping to identify industries likely to be competitive internationally. At the same time, however, Sri Lanka set direct import restrictions on a number of products.
In spite of the advantages that may accrue for firms engaging in importation or exportation, many factors can impede a firm's entry into trading relations, and these in turn affect the full realization of trade among countries. First, a firm's management may have imperfect knowledge of markets in foreign countries and thus be unable to take advantage of the avenues open to the firm. Or a producer might be aware of potential demand in foreign countries but nevertheless not know the mechanics of exporting and distributing in
foreign markets. The process of exporting, after all, involves a whole new set of terminology and institutions. Finally, a company might perceive that exporting or importing is too risky. A potential exporter, for example, may fear that payment will not be forthcoming, that payment will be in a currency that cannot easily be used, or that the competitive environment abroad is too unknown or disorderly. A potential importer may lack the resources to seek out global resources or may fear that supplies are too uncertain given the greater distance between countries and the perceived problems (whether accurate or not) of more strikes and unrest abroad.
Governmental policies might either enhance or retard the movement of trade. Policies to improve imperfect knowledge about the foreign environment might positively increase trade. Direct restrictions on the importation or exportation of goods are obvious barriers. It is safe to say, though, that all governments have policies that both enhance and retard trade. In the Sri Lankan case at the beginning of the chapter, the government sought to remove some marketing imperfections by helping to identify industries likely to be competitive internationally. At the same time, however, Sri Lanka set direct import restrictions on a number of products.
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