International trade and trade restrictions
International trade is based on the process of importing and exporting goods. Every good exported by one country must be imported by another. International trade increases total output. On a global economy imports must equal exports. The trade balance is the difference between exports and imports. When goods are imported more than exported it is trade balance deficit.
On microeconomic level there are gainers and lasers from international trade. Sometimes imports mean fewer jobs and less income for some domestic industries. Exports represent increased jobs and incomes for other industries. That is why government must use trade restrictions (embargo, quotas, tariffs, trade adjustment assistance):
- Embargo are out right prohibitions against import or export of particular goods.
- Quotas limit the quantity of imported and exported goods.
- Tariffs are taxes on imports.
- Trade adjustment assistance is compensation losses imposed by international trade.
The most known international trade organization is the World Trade Organization. It was created in 1995 replacing GATT. The World Trade Organization (WTO) is an international organization designed by its founders to supervise and liberalize international trade: eficient policy of country and productive specialization increases world output.