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Economics Definitions

Name three major types of trade barriers most commonly used.

There are numerous ways a government can regulate the flow of goods into its country; some of those ways are seen as fair, and some are viewed as "protectionist." The World Trade Organization (WTO) defines tariff as "customs duties on merchandise imports." When a country has received goods from another country, before those goods are off-loaded, a duty (a "tax") is placed on the goods, either levied on an "ad valorem basis" (a percentage of its value) or on a pre-set specific basis such as $8 per 60 pounds, as an example. And when the tariff is levied it is often done to increase the cost of those imported goods so that domestically produced goods end up costing less to consumers than the import costs. This is known as a tariff barrier. When the duty / tax placed on the imported goods is raised higher and higher, it becomes a barrier to that country's imports. Tariff "escalation," according to the WTO, is when higher import duties are placed on "semi-processed products" than on raw materials - "...and higher still on finished products." This is done as a kind of barrier, a protective barrier, for domestic processing industries, so that the country importing those materials will send them raw and not process them first. This will allow local and domestic processing facilities to retain their strength in the market, and protect the jobs of the people who work in those processing facilities.

In addition to tariff barriers, there is also the non-tariff barrier (NTB). This is a policy in which embraces the implementation of strict rules, "regulations and bureaucratic delays" (www.icfai.org) to help in basically keeping foreign goods away from certain domestic markets. These are used sometimes to help a president (in the case of the U.S.) keep a strong link with a certain constituency; for example, a president may institute rules to keep cheaper steel out of America, so he will curry favor with voters who live in steel-producing states, like Pennsylvania.

A third form of trade barrier is known as a quota. This is a trade barrier that falls under the category of "non-tariff barrier" and which limits the "quantity of goods that can be imported into the country during a specified period of time" (http://internationalecon.com).In the case of being set below the free trade level of imports, this quota is called a "binding quota."

In conclusion, there are many barriers that can be utilized to regulate imports, or even block certain imports, and governments all over the world use these strategies to their best advantage both economically and politically.

Name two factors that will increase the demand for labor, and two factors that will increase the supply of labor.

In an economic era where unemployment seems to always be in the news - and in particular, the shortage of good jobs, not just hospitality and service industry jobs - it is also important to look at creative ways to increase the demand for less-skilled workers.

In the book Generating Jobs: How to Increase Demand for Less-Skilled Workers, by Richard B. Freeman and Peter Gottschalk (and reviewed by David Neumark of Michigan State University in the Journal of Economic Literature), the authors say there are numerous ways to increase demands for labor for less-than-skilled workers. They mention "wage subsidies and public employment" as opposed to "supply side" policies, which seek to increase the investment in training and schooling for unskilled workers. The wage subsidy idea - combined with training and technical placement - could work well, even though it may be seen as a "government hand-out" to some. To those who cannot find work, public employment, if handled well, increases the labor supply ("net job growth") and reduces the amount of money paid out in unemployment benefits.

The answer to the question of how to increase the labor supply is perhaps simpler than increasing the demand: to wit, by increasing the number of immigrants one also increases the labor supply; the downside to that is that wages for native-born workers tend to decrease. A second way to increase the labor supply is to raise the age of retirement for workers, and/or raise the age at which pensions for older workers kick in. In either case, more workers remain in the market.

Why do our political leaders favor exports of U.S. goods and "Buy American" policies?

When a nation's trade deficit grows to over $58 billion, as it currently is for the United States, the wise policy for political and economic leaders is to encourage more exports of American goods and better marketing on the global market of American goods.

There is also an urge on the part of political leaders to encourage their citizens to "Buy American" and help reduce the fifty-eight billion in trade deficits. "Buy American" goes along with patriotic and nationalistic themes that any given executive administration may launch.