Barriers to trade
There are a number of barriers to international trade. We have discussed governmental restrictions but other factors can also affect trade.
Unstable exchange rates
Exchange rates can create uncertainty in international trade. For example, for a company exporting products, changes in the exchange rate can affect how much money the company will receive for their products, as well as a change in the price of their products in foreign countries. If the exchange rate is unstable, these risks will be higher.
Trade restrictions
Some governments have restrictions in place that prevent businesses from exporting or importing to the countries concerned. A historical example of this are the trade barriers that have existed between the USA and Cuba since 1958.
Legal and regulatory systems
The ability to sell goods in a market is governed by laws and regulations. For example, a licence may be required to export certain goods to particular countries.
Operating risks
Sometimes there will be an elevated risk of trading in some countries, perhaps due to general instability in the country, risk of terrorism or war. In some countries natural disasters are a risk, for example, countries close to areas of seismic activity (earthquakes and volcanoes) or areas that experience tropical storms, droughts or floods.
Economic sanctions
Sanctions stop trade from taking place between countries. Sanctions can be used to try to punish countries for their behaviour, e.g. the sanctions on Russia because of its attack on Ukraine.
Pause for thought
Read the following article:
Why did the UK impose sanctions on Belarus?
What goods/services were affected by the sanctions?