Affect of Business and Market

When a firm or an individual buys a good or a service produced more cheaply abroad, living standards in both countries increase. There are other reasons consumers and firms buy abroad that also make them better off—the product may better fit their needs than similar domestic offerings or it may not be available domestically. Access to international markets plays an important role in an economy’s development. While tariffs are still among the policy instruments most widely-used to promote or restrict trade, their relative importance has declined. Other factors, namely trade-related transaction costs, have taken precedence. Logistics and freight expenses, customs administrative fees and border costs have become more important for small traders. While the significance of small and medium-size enterprises (SMEs) in the overall economy is widely recognized, until recently SMEs were largely absent from trade debates. The government’s trade policy can affect your business by making it easier or more difficult to trade across international borders. Trade policy can include the imposition of import tariffs, quotas on imports and exports of certain goods, and subsidies for local producers to support them against international competition. Governments often enter into bilateral trade agreements with other countries, with the aim of reducing tariffs and barriers to business and establishing a free trade area or common market. This can be helpful to some businesses, but can also lead to increased competition from abroad.