How can you identify problems in the international trade system?

2 Identify the trade barriers

The second step is to identify the trade barriers that restrict or distort the free flow of goods and services across borders. Trade barriers can be either tariff or non-tariff. Tariff barriers are taxes or duties imposed on imported goods or services, which raise their prices and reduce their demand. Non-tariff barriers are any other measures that limit or prevent the entry or sale of foreign goods or services, such as quotas, subsidies, standards, or regulations. Trade barriers can protect domestic producers from foreign competition, but they can also harm consumers, reduce efficiency, and create trade disputes.

4 Assess the trade effects

The fourth step is to assess the trade effects that result from the international trade system. These effects, which can be either positive or negative, involve changes in production, consumption, income, employment, and welfare. Positively, trade increases the quantity and quality of goods and services available to consumers, enables producers to specialize in their comparative advantage, stimulates innovation and technological progress, and fosters competition and cooperation. Conversely, trade creates winners and losers, exposes domestic producers to foreign competition, generates externalities such as pollution or depletion of natural resources, and creates conflicts and disputes which may lead to trade wars or sanctions.

5 Compare the trade scenarios

The fifth step is to compare the trade scenarios that show how the international trade system could evolve in the future. Trade scenarios are hypothetical situations that reflect different assumptions, expectations, or preferences about the international trade system. They can range from optimistic to pessimistic, depending on the perspective and criteria. Optimistic scenarios include trade liberalization, which removes or reduces trade barriers; trade integration, which enhances coordination and cooperation of trade policies and practices; and trade diversification, which reduces dependence and vulnerability of trade relations. Pessimistic scenarios involve trade protectionism, which decreases volume and diversity of international trade; trade fragmentation, which weakens coordination and cooperation of trade policies; and trade concentration, which increases risk and instability of trade relations.

6 Apply the trade frameworks

The sixth step is to apply trade frameworks that help you analyze and understand the international trade system and its problems. Trade frameworks can be either descriptive or normative, depending on the purpose and scope. Descriptive frameworks, such as the Ricardian model, the Heckscher-Ohlin model, and the gravity model, demonstrate how comparative advantage, factor endowments, and size and distance of countries affect their trade flows and costs. Normative frameworks include the mercantilist doctrine, which advocates for a positive trade balance; the free trade doctrine, which supports a free trade system; and the fair trade doctrine, which promotes a fair trade system that protects vulnerable or disadvantaged groups.