Traditionally trade was regulated through bilateral treaties between two nations. Most nations had high tariffs and many restrictions on international trade. In the years since the Second World War, multilateral treaties like the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization have attempted to create a globally regulated trade structure.
Free trade is usually most strongly supported by the most economically powerful nations though they often engage in selective protectionism for those industries that are politically important domestically. During economic downturns there is often strong pressure on the government to increase tariffs to protect domestic industries and the associated jobs.
Risks in International Trade
Economic risks
- Risk of insolvency of the buyer
- Risk of protracted default – failure of the buyer to pay within a reasonable time
- Risk of non-acceptance (and the associated problem of return or replacement)
Political risks
- Risk of cancellation or non-renewal of export or import licenses
- War risk
- Risk of expropriation or confiscation of the importer’s company
- Transfer risk associated with monetary exchange controls
U.S. Import Regulation
Information on U.S. import and export regulations can be found at the U.S. Customs and Border Protection website at http://www.cbp.gov/.
© 2006-2007 East-West Economic Development Center