The greatest benefit of international trade is that exchanges bring about a decline in production costs, which results from the free movement of the factors of production; the decline in production costs in turn causes consumer prices to drop. Both of these changes, however, create a shock effect on local industries. Most smaller and marginal companies cannot sustain the losses in their market share and sales that are almost sure to result from unbridled competition with more experienced and more efficient foreign firms.
To avoid devastating effects on such small firms and their workers, governments usually devise artificial barriers to international trade. The effect of these barriers is to increase the price of the imported product and to cut down on the amount of imports. There are two main types of international trade barriers: tariff barriers and nontariff barriers.
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