TARIFF & NON-TARIFF BARRIERS

MASTER OF COMMERCE (BANKING & FINANCE)

SEMESTER-I (2013-14)
SUBMITTED TO:
In Partial Fulfillment Of The Requirement For The Award Of Degree Of M.Com
(Banking & Finance)
SUBMITTED BY:
Name: Sukeshni Vishnu Kedare
Roll No: 2032

UNDER THE GUIDANCE OF

DR. ANUJA DESAI
MAHARSHI DYANAND COLLEGE OF ARTS, SCIENCE & COMMERCE
MUMBAI-12
MAHARSHI DYANAND COLLEGE OF ARTS,
SCIENCE & COMMERCE MUMBAI-12
[1]

CERTIFICATE
This is the certify that Ms. Sukeshni kedare of M.Com (Banking & Finance) Sem-I 2013-14 bearing roll no 2032
has successfully completed project on Tariff & Nontariff Barriers under the guidance of Dr. Anuja Desai.

Course co-ordinate

Principal

Internal Examine Project Guide

External examiner

DECLARATION

[2]

I Sukeshni Vishnu Kedare bearing Roll No: 2032, student of M.Com (Banking & Finance) semester-I 2013-14
here by declares that I have completed project on Tariff & Non-Tariff Barriers the information submitted in the
project is true & original to the my knowledge.

Signature
Sukeshni Vishni Kedare
Roll No:2032

ACKOWLEDGEMENT

I would like to express my gratitude to all those who gave me the possibility to complete this project. I want
to thank the Maharshi Dayanand College, to giving me the opportunity to commence this project in the first instance.
I have furthermore to thank Mrs. Anuja Desai for her continuous guidance & support. She has encouraged me to go
ahead.

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Finally I would like to thank my professors, teachers, friends, family whos most valuable support and
cooperation which has made me complete this project fruitfully.

TARIFF
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AND
NON-TARIFF

BARRIERS

INTRODUCTION
This

report

examines

tariff

and

non-tariff

policies

restrict

trade

betweencountries in agricultural commodities. Many of these policies are now subject toimportant disciplines under the 1994
GATT agreement that is administered by the World Trade Organization (WTO). The paper is organized as follows. First, tariffs,
import quotas, and tariff rate quotas are discussed. Then, a series of non-tariff barriers to trade are examined, including
voluntary export restraints, technical barriers to trade, domestic content regulations, import licensing, the operations of import
State Trading Enterprises(STEs), and exchange rate management policies. Finally, the precautionary principle, an environment
related rationale for trade, and phytosanitary barriers to trade are discussed.

BACKGROUND
Tariffs and Tariff Rate Quotas
Tariffs,
which
are
taxes
on
imports
of
commodities
into
a
country
or
region,
areamong the oldest forms of government intervention in economic activity. They areimplemented for two clear economic purp
oses. First, they provide revenue for thegovernment. Second, they improve economic returns to firms and suppliers of resources
to domestic industry that face competition from foreign imports. Tariffs are widely used to protect domestic producers incomes
from foreign competition. This protection comes at an economic cost to domestic consumers who pay higher prices for import
competing goods and to the economy as a whole through the inefficient allocation of resources to the import competing
domestic industry. Therefore, since1948, when average tariffs on manufactured goods exceeded 30 percent in mostdeveloped
economies, those economies have sought to reduce tariffs on manufactured goods through several rounds of negotiations under
the General Agreement on Tariffs Trade (GATT). Only in the most recent Uruguay Round of negotiations were trade and tariff
restrictions in agriculture addressed. In the past, and even under GATT, tariffs levied on some agricultural commodities by
some countries have been very large. When coupled with other barriers to trade they have often constituted formidable barriers
to market access from foreign producers. In fact, tariffs that is set high enough can block all trade and act just like import bans.

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A tariff-rate quota (TRQ) combines the idea of a tariff with that of a quota. The typica lTRQ will set a low tariff for imports of a
fixed quantity and a higher tariff for any imports that exceed that initial quantity. In a legal sense and at the WTO, countries are
allowed to combine the use of two tariffs in the form of a TRQ, even when they have agreed not to use strict import quotas. In
the United States, important TRQ schedules are set for beef, sugar, peanuts, and many dairy products. In each case, the initial
tariff rate is quite low, but the over-quota tariff is prohibitive or close to prohibitive for most normal trade. Explicit import
quotas used to be quite common in agricultural trade. They allowed governments to strictly limit the amount of imports of a
commodity and thus to plan on a particular import quantity in setting domestic commodity programs. Another commonnontariff
barrier
(NTB)
was
the
so-called
voluntary
export
restraint
(VER)
under which exporting countries would agree to limit shipments of a commodity to theimporting country, although often only
under threat of some even more restrictive or onerous activity. In some cases, exporters were willing to comply with a VER
because2

They were able to capture economic benefits through higher prices for their exports in the importing countrys market.

ISSUES
In the Uruguay round of the GATT/WTO negotiations, members agreed to drop the use of import quotas and other non-tariff
barriers in favor of tariff-rate quotas. Countries also agreed to gradually lower each tariff rate and raise the quantity to which
the low tariff applied. Thus, over time, trade would be taxed at a lower rate and trade flows would increase. Given current U.S.
commitments under the WTO on market access, options are limited for U.S. policy innovations in the 2002 Farm Bill Vis a Vis
tariffs on agricultural imports from other countries. Providing higher prices to domestic producers by increasing tariff son
agricultural imports is not permitted. In addition, particularly because the U.S. is a net exporter of many agricultural
commodities, successive U.S. governments have generally taken a strong position within the WTO that tariff and TRQ barriers
need to be reduced.

NON-TARIFF TRADE BARRIERS

Countries use many mechanisms to restrict imports. A critical objective of the Uruguay Round of GATT negotiations, shared by
the U.S., was the elimination of non-tariff barriers to trade in agricultural commodities (including quotas) and, where necessary,
to replace them with tariffs a process called tarrification. Tarrification of agricultural commodities was largely achieved and
viewed as a major success of the 1994 GATT3

Agreement. Thus, if the U.S. honors its GATT commitments, the utilization of new non-tariff barriers to trade is not really an
option for the 2002 Farm Bill.

Domestic Content Requirements

Governments
have
used
domestic
content
regulations
to
restrict
imports.
The
intent
isusually to stimulate the development of domestic industries. Domestic contentregulations typically specify the percentage of a
products total value that must be produced domestically in order for the product to be sold in the domestic market (Carbaugh).
Several
developing
countries
have
imposed
domestic
content
requirements
tofoster agricultural, automobile, and textile production. They are normally used in conjunction with a policy of import
substitution in which domestic production replaces imports. Domestic content requirements have not been as prevalent in
agriculture as in some other industries, such as automobiles, but some agricultural examples illustrate their effects. Australia
used domestic content requirements to support leaf tobacco production.

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In order to pay a relatively low import duty on imported tobacco, Australian cigarettemanufacturers were required to use 57
percent domestic leaf tobacco. Member countries of trade agreements also use domestic content rules to ensure that
nonmembers do not manipulate the agreements to circumvent tariffs. For example, North American Free Trade Agreement
(NAFTA) rules of origin provisions stipulate that all single-strength citrus juice must be made from 100 percent NAFTA origin
fresh citrus fruit

OBJECTIVE OF STUDY
International trade policies deals with the policies of the national govt. relating to exports of various goods
and services in various countries either on equal terms & conditions or on discriminatory terms & conditions.
Trade policies also aim at protecting the domestic industry from the competition of the advanced countries
through imposing quotas & build competencies by providing subsidies.

INSTRUMENTS OF TRADE POLICY:

Tariff
Non-tariff
Tariffs Barriers represent taxes on imports of commodities into a country/region and are among the oldest form
of government intervention in the economic activity.
Non Tariff Barriers represent the great variety of mechanisms that countries use in order to restrict the imports.
For example:

Technical Barriers To Entry;

Import Licensing;
Domestic Content Regulations;
Voluntary Export Restrains Etc.
The non tariff barriers are mentioned in GATT 1947, art.37 (1/b):
(a) The developed contracting parties shall to the fullest extent possible _ that is, except when compelling reasons,
which may include legal reasons, make it impossible _ give effect to the following provisions:
(b) refrain from introducing, or increasing the incidence of, customs duties or non-tariff import barriers on products
currently or potentially of particular export interest to less-developed contracting parties;

BARRIERS
Accessibility to an import market may be hampered by the tariff barriers, and the non-tariff barriers, of the imporing
country. The tarif barriers restraint are to protect the domestic l manufactures or producers from forign competitin.
Exports products generally become less competitive as aresult of barriers.
High custom duty
The high import duties in many ountries have been reduced the former GATT ( general agreement on tariff & trade)
multilateral agrements. The GATT was formed in geneva, switzerland, in 1947 & it was succeeded by the WTO
(world trade organization) on january 1,1995. Ther organization, thourgh multilateral agreements, helps reduce trade

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barriers between the signatory countries & promotes trade thourgh tareiff concessions. WTO has widw power to
regulate international competition.

Countervaling duty
Counterveling duty is a duty imposed in addition to the regular (general) import duty, in order to counteract or offset
the subsidy & bounty paid to forighn export manufactures by their government as an incentive to export, that would
reduce the cost of goods,.Imposing a countervailing duty is the answer to unfair competition from subsidized forign
goods.

Anti-dumping duty
Anti dumping duty is a duty imposed to offset the advantage gained by the foreign expoters when they sell their
goods to an importing country at a price far lower than their domestic selling price or below cost. Dumping usually
occurs from the oversupply of goods, which is often a result of overproduction, and from disposing obsolete to other
markets.

Customs Duty Assements

Customs duties are generally assessed in three ways: ad valorem duty, specific duty and compound duty.

Ad Valorem duty: Ad valorem means according to value. Duty is aasessed as percentage of the import value
of goods (e.g. 30% of FOB price)
Specify duty : Specify duty is assessed on the basis of some units of measurements, such as quantity (e.g.$5
per dozen) or weight, either net weight or gross weight (e.g. $20 per kilogram net).

Compound Duty
Compound duty is assessed as a combination of the specific duty and ad valoren duty ($20 per kilogram net, plus
30% of FOB price).
Tariff are often created to protect infant indutries and developing economices, but are also used by more
advanced economices with developed industries. Here are five top resons tariffa are:

1.POTECTING DOMESTIC EMPOLOYMENT

The levying of tariffs is often highly politiczed. The possibility of increased compotition from imported goods can
threaten domestic industries. These domestic componies may fire workers or shift production abroad cut costs, which
means higher unemployment and less happy electorate. The unemployment argument often shifts to domestic
industries complaning about chep forigh labour, and how poor working conditions and lack of regulation allow
foreign companies to produce goods more cheply. In economices, however, countries will continue to produce goods
until they no longer have a comparative advantage ( non to be confused with an advantages).

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2. PROTECTING CONSUMERS
A goerment levy a tariff or products it feels could endanger its population. For example, soth korea may place a tariff
on imported beet from the united states if its thinks that the goods can be tainted with diseases.

3.INFANT INDUSTRIES
The use of tariffs to protect infant industries can be seen by the Import Substitution Industrialization (ISI) strategy
employed by many developing nations. The government of a developing economy will levy tariffs on imported
goods in industries in which it wants to foster growth. This increases the prices of imported goods and creates a
domestic market for domestically produced goods, while protecting those industries from being forced out by more
competitive pricing. It decreases unemployment and allows developing countries to shift from agriculture. Criticisms
of this sort of protectionist strategy revolve around the cost of subsidizing the development of infant industries. If an
industry develops without competition, it could wind up producing lower quality goods, and the subsidies required to
keep the state-backed industry.

4. NATIONAL SECURITY
Barriers are also employed by developed countries to protect certain industries that are deemed strategically
important, such as those supporting national security. Defense industries are often viewed as vital to state interests,
and often enjoy significant levels of protection. For example, while both Western Europe and the United States are
industrialized, both are very protective of defense-oriented.

5. RETALIATION
Countries may also set tariffs as a retaliation technique if they think that a trading partner has not played by the rules.
For example, if France believes that the United States has allowed its wine producers to call its domestically
produced sparkling wines "Champagne" (a name specific to the Champagne region of France) for too long, it may
levy a tariff on imported meat from the United States. If the U.S. agrees to crack down on the improper labeling,
France is likely to stop its retaliation. Retaliation can also be employed if a trading partner goes against the
government's foreign policy objectives.

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TARIFF BARRIERS:
Meaning:
Refers to the tax imposed on the goods when they enter or leave the national frontier or boundary.

Definition:
(Economics) A Barrier To Trade Between Certain Countries Or Geographical Areas Which Takes The
Form Of Abnormally High Taxes Levied By A Government On Imports Or Occasionally Exports For Purposes Of
Protection, Support Of The Balance Of Payments, Or The Raising Of Revenue.
Tariffs are the most common kind of barrier to trade; indeed, one of the purposes of the WTO is to enable Member
countries to negotiate mutual tariff reductions. Before we consider the legal framework that provides the discipline
regarding tariffs, we must understand the definition of tariffs, their functions, and their component elements (rates,
classifications, and valuations).
Tariff barriers are duties imposed on goods which effectively create an obstacle to trade, although this is not
necessarily the purpose of putting tariffs in place. Tariff barriers are also sometimes known as import restraints,
because they limit the amount of goods which can be imported into a country. Many organizations which promote
trade are concerned about both tariff and non-tariff barriers to free trade, and a number of nations have agreed to
radically reduce their trade barriers to promote the exchange of goods across their borders.
A number of different types of duties can be levied when goods cross international boundaries. With an ad valorem
duty, for example, the importer must pay a fee which is calculated as a percentage of the value of the goods being
imported. Specific tariffs are set amounts which are levied on products which are imported, regardless of values,
while environmental tariffs penalize nations with poor environmental records.
For importers, tariff barriers can make it difficult to bring goods into a country. The importer may be forced to import
less because the tariff barriers cannot be afforded otherwise, and it may need to charge more for the goods to make
importing worthwhile. Tariffs are designed to force importers to do this to level the field between domestic producers
and importers, allowing costly domestic producers to compete with importers who may be able to bring in goods at
lower cost.

IMPACTS OF TARIFF BARRIERS:

Tariff barriers tend to increase:
Inflationary pressures
Special interest privileges.
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 Government control & political considerations in economic matters.

Tariff barriers tend to weaken:

Balance of payments positions.
Supply & demand patterns.
International relations (they can start trade wars)

Tariff barriers tend to restrict:

Manufacture supply sources
Choices available to consumers.
Competition.

IMPACT OF TARIFF ON TRAFFIC

Call minutes are highly elastic against price, this means that the demand for call minutes varies greatly according to
price. A slight decrease in price leads to a great increase in call minutes. The higher the price, the more this effect is
noticeable, for both business and residential customers on international or local calls. This means that it is often the
case that more revenue is achievable at lower prices, that is, E < -1.
Internet traffic research show that the traffic intensity is directly affected by the tariffs charged in connecting customers to
their Internet Service Provider (ISP). For example, a circuit-switched network provider charges different tariffs at different
times of the day. It was noted that at the time that the rates decreased, the traffic intensity logged by the ISP increased
dramatically and then decayed over time at an exponential rate. The conclusion of the research was that by varying prices over
time, a telecommunications service provider can reduce the level of the traffic intensity at peak periods, resulting in lower
equipment costs because of the reduced need to provision to meet peak demand, which in turn leads to increases in long-term
revenue and profitability.

TYPES OF TARIFFS:
On the basis of purpose:

Revenue Tariff:
To provide state with revenue.
Levied on luxury goods.

Protective Tariff:
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 To maintain & encourage those branches of home industry protected by the duties.

TYPES OF TARIFFS AND TRADE BARRIERS

There are several types of tariffs and barriers that a government can employ:

Specific tariffs
Ad valorem tariffs
Licenses
Import quotas
Voluntary export restraints
Local content requirements

SPECIFIC TARIFFS
A fixed fee levied on one unit of an imported good is referred to as a specific tariff. This tariff
canvary according to the type of good imported. For example, a country could levy a $15 tariff on each pair of shoes
imported, but levy a $300 tariff on each computer imported.
AD VALOREM TARIFFS
The phrase AD VALOREM is Latin for "according to value", and this type of tariff is levied on a good based on a
percentage of that good's value. An example of an ad valorem tariff would be a15% tariff levied by Japan on U.S.
automobiles. The 15% is a price increase on the value of the automobile, so a $10,000 vehicle now costs $11,500 to
Japanese consumers. This price increase protects domestic producers from being undercut, but also keeps prices
artificially high for the Japanese car shoppers.

Non-Tariff Barriers To Trade Include

LICENSES
A license is granted to a business by the government, and allows the business to import a certain type of good into
the country. For example, there could be a restriction on imported cheese, and licenses would be granted to certain
companies allowing them to act as importers. This creates a restriction on competition, and increases prices faced by
consumers.
IMPORT QUOTAS
Import quotas a restriction placed on the amount of a particular good that can be imported. This sort of barrier is
often associated with the issuance of licenses. For example, a country may place a quota on the volume of imported
citrus fruit that is allowed.
VOLUNTARY EXPORT RESTRAINTS (VER)

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This type of trade barrier is "voluntary" in that it is created by the exporting country rather than the importing one. A
voluntary export restraint is usually levied at the behest of the importing country, and could be accompanied by a
reciprocal VER. For example, Brazil could place a VER on the exportation of sugar to Canada, based on a request by
Canada. Canada could then place a VER on the exportation of coal to Brazil. This increases the price of both coal
and sugar, but protects the domestic industries.
LOCAL CONTENT REQUIREMENT
Instead of placing a quota on the number of goods that can be imported, the government can require that a certain
percentage of a good be made domestically. The restriction can be a percentage of the good itself, or a percentage of
the value of the good. For example, a restriction on the import of computers might say that 25% of the pieces used to
make the computer are made domestically, or can say that 15% of the value of the good must come from
domestically produced components.

FUNCTIONS OF TARIFFS
Tariffs have three primary functions: to serve as a source of revenue, to protect domestic industries, and to remedy
trade distortions (punitive function).
The revenue function comes from the fact that the income from tariffs provides governments with a source of
funding. In the past, the revenue function was indeed one of the major reasons for applying tariffs, but economic
development and the creation of systematic domestic tax codes have reduced its importance in the developed
countries. For example,
Japan generates about 90 billion yen in tariff revenue, but this is only 1.7 percent of total tax revenues (fiscal 1996).
In some developing countries, however, revenue may still be an
Tariffs is also a policy tool to protect domestic industries by changing the conditions under which goods compete in
such a way that competitive imports are placed at a disadvantage. In point of fact, a cursory examination of the tariff
rates employed by different countries does seem to indicate that they reflect, to a considerable extent, the
competitiveness of domestic industries. In some cases, tariff quotas are used to strike a balance between market
access and the protection of domestic industry. Tariff quotas work by assigning low or no duties to imports up to a
certain volume (primary duties) and then higher rates (secondary duties) to any imports that exceed that level.
The WTO bans in principle the use of quantitative restrictions as a means of protecting domestic industries, but does
allow tariffs to be used for this purpose.3 The cost of protecting domestic industry comes in the form of a general
reduction in the protecting country's economic welfare and in the welfare of the world economy at large, but tariffs are still
considered to be more desirable than quantitative restrictions.

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Punitive tariffs may be used to remedy trade distortions resulting from measures adopted by other countries. For
example, the Antidumping Agreement allows countries to use "antidumping-duties" to remedy proven cases of
injurious dumping; similarly, the Subsidies Agreement allows countries to impose countervailing duties when an
exporting country provides its manufacturers with subsidies that, while not specifically banned, nonetheless damage
the domestic industry of an importing country.
Purpose: To Protect The Domestic Industry By Increasing The Cost Of Imported Goods.
Example: GoI imposed tariffs to protect domestic automobile industry, sugar industry, cement industry & steel
industry.

NON TARIFF BARRIERS

Non-Tariff measures include all measures, other than tariffs, the effect of which is to restrict imports, or to
significantly distort trade.
Tariff raise prices & limit trade sometime the govt. alter the prices of products to limit their product import &
export.( Direct price influence)-Susidies help companies be competitive when to overcome the market imperfections
are least controversial.Aid and aLoans to other countries & the recipient is required to spend the fund in the donor
country known as tied aids and tied loans. (Quantity Controls)- Quota means setting the total amount to be traded or
allocate amount by its country. Voluntaru Export Restraint(VER)-when a voluntary choice by a particular country to
constrain its shipment to another country to protect the political relations. Embargoes-A specific tyoe of quota the
prohibits all forms of trade (fixed the limit at zero) regardless of origin or destinations. Buy local legislation-Govt.
give preference to domestically made goods or specify a domestic content resrictions.Standard & labels- Arbitrary
standard, licesing arrangements, administarative delays, reciprocal requirement service resrictions
TYPES OF NON-TARIFF BARRIERS:
Specific limitation and trade:
Quotas
Imports licensing requirements.
Proportion restrictions of foreign to domestic goods (local content requirement)
Custom and administrative entry procedure:

Valuation system.
Antidumping practice.
Documentation requirement.
Fees.
Government participation in trade:

Government procurement policies.

Exports subsidies.
Countervailing duties.

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 Domestic assistant programs.

Charges on imports:

Prior import deposit subsidies

Administrative fees
Special supplementary duties
Import credit discriminations
Border taxes.

IMPACT OF NON-TARIFF BARRIERS:

Have emerged as potent protectionist tool
It being less transparent, its difficult to identify & quantify its impact.
Non

Tariff

Barriers

and

Exports:

An

Impact

Analysis

from

Africa

EU

and

Africa

USA

Trade

Relations"

There have been divergent opinions as to what undermine Africas export flows to the developed nations particularly
the European Union (EU) and United State of America (USA). While tariff barriers had been said to be a major
hindrance to Africas exports according to African governments, studies have found that tariffs which are part of
instruments of trade restrictions (ITRs) were not the only problems to Africas export flows. However, most of these
studies examined only the tax (price) related trade restrictions without considering the non tariff barriers.
Besides, conclusions of these studies were based on data that were limited to sub Saharan Africa (SSA). These gaps
were filled by this study by providing an econometrics analysis of trade restriction issues and also determine the
most significant trade restriction instruments that inhibit Africas export to these markets. Thus, this study evaluates
the impact of non tariff barriers in the EU and USA on Africas exports with the view of examining the extent to
which its determined market access.

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TARIFFS AND MODERN TRADE

The role tariffs play in international trade has declined in modern times. One of the primary reasons for the decline
is the introduction of international organizations designed to improve free trade, such as the World Trade
Organization (WTO). Such organizations make it more difficult for a country to levy tariffs and taxes on imported
goods, and can reduce the likelihood of retaliatory taxes. Because of this, countries have shifted to non-tariff barriers,
such as quotas and export restraints. Organizations like the WTO attempt to reduce production and consumption
distortions created by tariffs. These distortions are the result of domestic producers making goods due to inflated
prices, and consumers purchasing fewer goods because prices have increased. (To learn about the WTO's efforts,
read
What Is The World Trade Organization?
Since the 1930s, many developed countries have reduced tariffs and trade barriers, which has improved global
integration and brought about globalization. Multilateral agreements between governments increase the likelihood of
tariff reduction, while enforcement on binding agreements reduces uncertainty.

NON-TARIFF BARRIERS TO TRADE

(NTBs) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of
NTB's are anti-dumping measures and countervailing duties, which, although they are called "non-tariff" barriers,
have the effect of tariffs once they are enacted. Their use has risen sharply after the WTO rules led to a very
significant reduction in tariff use. Some non-tariff trade barriers are expressly permitted in very limited
circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect delectable
natural resources. In other forms, they are criticized as a means to evade free trade rules such as those of the World
Trade Organization(WTO), the European Union(EU), or North American Free Trade Agreement(NAFTA) that
restrict the use of tariffs.
Some of non-tariff barriers are not directly related to foreign economic regulations, but nevertheless they have a
significant impact on foreign-economic activity and foreign trade between countries. Trade between countries is
referred to trade in goods, services and factors of production. Non-tariff barriers to trade include import quotas,
special licenses, unreasonable standards for the quality of goods, bureaucratic delays at customs, export restrictions,
limiting the activities of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and
phi to-sanitary measures, rules of origin, etc. Sometimes in this list they include macroeconomic measures affecting
trade.

Six Types Of Non-Tariff Barriers To Trade

1. QUOTAS

ImportLicensingrequirements
Proportion restrictions of foreign to domestic goods (local content requirements)
Minimum import price limits

2.EMBARGOES

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Customs and Administrative Entry Procedures:

Valuation systems
Antidumping practices
Tariff classifications
Documentation requirements

Fees
3. STANDARDS

Standard disparities
Intergovernmental acceptances of testing methods and standards
Packaging, labeling, and marking

4. GOVERNMENT PARTICIPATION IN TRADE

Government procurement policies

Export subsidies
Countervailing duties
Domestic assistance programs

5. CHARGES ON IMPORTS

Prior import deposit subsidies

Administrative fees
Special supplementary duties
Import credit discriminations
Variable levies
Border taxes

6. OTHERS:

Voluntary export restraints

Orderly marketing agreements

Examples Of Non-Tariff Barriers To Trade On-Tariff Barriers To Trade Can Be:

Import bans
General or product-specific quotas
Rules of Origin
Quality conditions imposed by the importing country on the exporting countries
Sanitary and phy to-sanitary conditions
Packaging conditions
Labeling conditions
Product standards
Complex regulatory environment
Determination of eligibility of an exporting country by the importing country
Determination of eligibility of an exporting establishment (firm, company) by the importing country.

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Additional trade documents like Certificate of Origin, Certificate of Authenticity etc.

health regulation
Employment law
Import licenses
State subsidies procurement, trading, state
Export subsidies
Fixation of a minimum import price
Product classification
Quota shares
market controls and multiplicity
Inadequate infrastructure
"Buy national" policy
Over-valued currency
property laws patents, copyrights
Restrictive licenses
Seasonal import regimes
Corrupt and/or lengthy customs procedures

TYPES OF NON- TARIFF BARRIERS

There are several different variants of division of non-tariff barriers. Some scholars divide between internal taxes,
administrative barriers, health and sanitary regulations and government procurement policies. Others divide nontariff barriers into more categories such as specific limitations on trade, customs and administrative entry procedures,
standards, government participation in trade, charges on import, and other categories. We choose traditional
classification of non-tariff barriers, according to which they are divided into 3 principal categories.
The first category includes methods to directly import restrictions for protection of certain sectors of national
industries: licensing and allocation of import quotas, antidumping and
Countervailing duties, import deposits, so-called voluntary export restraints, countervailing duties, the system of
minimum import prices, etc. Under second category follow methods that are not directly aimed at restricting foreign
trade and more related to the administrative bureaucracy, whose actions, however, restrict trade, for example:
customs procedures, Technical standards and norms, sanitary and veterinary standards, requirements for labeling and
packaging, bottling, etc. The third category consists of methods that are not directly aimed at restricting the import or
promoting the export, but the effects of which often lead to this result.
The non-tariff barriers can include wide variety of restrictions to trade. Here are some

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Example of the popular NTBs.

Licenses
The most common instruments of direct regulation of imports (and sometimes export) are licenses and quotas.
Almost all industrialized countries apply these non-tariff methods. The license system requires that a state (through
specially authorized office) issues permits for foreign trade transactions of import and export commodities included
in the lists of licensed merchandises. Product licensing can take many forms and procedures. The main types of
licenses are general license that permits unrestricted importation or exportation of goods included in theists for a
certain period of time; and one-time license for a certain product importer (exporter) to import (or export). One-time
license indicates a quantity of goods, its cost, its country of origin (or destination), and in some cases also customs
point through which import (or export) of goods should be carried out. The use of licensing systems as an instrument
for foreign trade regulation is based on a number of international level standards agreements. In particular, these
agreements include some provisions of the General Agreement on Tariffs and Trade and the Agreement on Import
Licensing Procedures, concluded under the GATT (GATT).

Quotas
Licensing of foreign trade is closely related to quantitative restrictions quotas on imports and exports of certain
goods. A quota is a limitation in value or in physical terms, imposed on import and export of certain goods for a
certain period of time. This category includes global quotas in respect to specific countries, seasonal quotas, and socalled "voluntary" export restraints. Quantitative controls on foreign trade transactions carried out through one-time
license.
Quantitative restriction on imports and exports is a direct administrative form of government regulation of foreign
trade. Licenses and quotas limit the independence of enterprises With a regard to entering foreign markets, narrowing
the range of countries, which may be entered into transaction for certain commodities, regulate the number and range
of goods permitted for import and export. However, the system of licensing and quota imports and exports,
establishing firm control over foreign trade in certain goods, in many cases turns out to be more flexible and
effective than economic instruments of foreign trade regulation. This can be explained by the fact, that licensing and
quota systems are an important instrument of trade regulation of the vast majority of the world.
Agreement On A "Voluntary" Export Restraint

In the past decade, a widespread practice of concluding agreements on the "voluntary export restrictions and
the establishment of import minimum prices imposed by leading Western nations upon weaker in economical
or political sense exporters. The specifics of these types of restrictions is the establishment of unconventional
techniques when the trade barriers of importing country, are introduced at the border of the exporting and not
importing country. Thus, the agreement on "voluntary" export restraints is imposed on the exporter under the
threat of sanctions to limit the export of certain goods in the importing country. Similarly, the establishment
of minimum import prices should be strictly observed by the exporting firms in contracts with the importers
of the country that has set such prices. In the case of reduction of export prices below the minimum level, the
importing country imposes anti-dumping duty which could lead to with Drawl from the market. Voluntary"
export agreements affect trade in textiles, Footwear, dairy products, consumer electronics, cars, machine
tools, etc.

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Problems arise when the quotas are distributed between countries, because it is necessary to ensure that
products from one country are not diverted in violation of quotas set ou tin second country. Import quotas are
not necessarily designed to protect domestic producers. For example, Japan, maintains quotas on many
agricultural products it does not produce. Quotas on imports is a leverage when negotiating the sales of
Japanese exports, as well as avoiding excessive dependence on any other country in respect of necessary
food, supplies of which may decrease in case of bad weather or political conditions.

Export quotas can be set in order to provide domestic consumers with sufficient stocks of goods at low prices,
to prevent the depletion of natural resources, as well as to increase export prices by restricting supply to
foreign markets. Such restrictions (through agreements on various types of goods) allow producing countries
to use quotas for such commodities as coffee and oil; as the result, prices for these products increased in
importing countries.

EMBARGO
Embargo is a specific type of quotas prohibiting the trade. As well as quotas, embargoes may be imposed on imports
or exports of particular goods, regardless of destination, in respect of certain goods supplied to specific countries, or
in respect of all goods shipped to certain countries. Although the embargo is usually introduced for political
purposes, the consequences, in essence, could be economic.
STANDARDS
Standards take a special place among non-tariff barriers. Countries usually impose standards on classification,
labeling and testing of products in order to be able to sell domestic products, but also to block sales of products of
foreign manufacture. These standards are sometimes entered under the pretext of protecting the safety and health of
local populations.
Administrative and bureaucratic delays at the entrance

Among the methods of non-tariff regulation should be mentioned administrative and bureaucratic delays at
the entrance which increase uncertainty and the cost of maintaining inventory.

Import Deposits

Another example of foreign trade regulations is import deposits. Import deposits is a form of deposit, which
the importer must pay the bank for a definite period of time (non-interest-bearing deposit) in an amount equal
to all or part of the cost of imported goods.
At the national level, administrative regulation of capital movements is carried out mainly within a
framework of bilateral agreements, which include a clear definition of the legal regime, the procedure for the
admission of investments and investors. It is determined by mode (fair and equitable, national, most-favorednation), order of nationalization and compensation, transfer profits and capital repatriation and dispute
resolution.

Foreign Exchange Restrictions And Foreign Exchange Controls

Foreign exchange restrictions and foreign exchange controls occupy a special place among the non-tariff
regulatory instruments of foreign economic activity. Foreign exchange restrictions constitute the regulation of
transactions of residents and nonresidents with currency And other currency values. Also an important part of
the mechanism of control of foreign economic activity is the establishment of the national currency against
foreign currencies.
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The Transition From Tariffs To Non-Tariff Barriers

One of the reasons why industrialized countries have moved from tariffs to NTBs is the fact that developed
countries have sources of income other than tariffs. Historically, in the formation of nation-states,
governments had to get funding. They received it through the introduction of tariffs. This explains the fact
that most developing countries still rely on tariffs as a way to finance their spending. Developed countries can
afford not to depend on tariffs, at the same time developing NTBs as a possible way of international trade
regulation. The second reason for the transition to NTBs is that these tariffs can be used to support weak
industries or compensation of industries, which have been affected negatively by the reduction of tariffs. The
third reason for the popularity of NTBs is the ability of interest groups to influence the process in the absence
of opportunities to obtain government support for the tariffs.

NON-TARIFF MEASURES

Non-tariff measures (NTMs) are of particular concern to exporters and importers in developing countries, as
they are a major impediment to international trade and can prevent market access. Exporting companies seeking
access to foreign markets and companies importing products need to comply with a wide range of requirements
including technical regulations, product standards and
customs
procedures.
The business sector, particularly in developing countries, often lacks the information, capabilities and facilities
needed. Meeting the complex requirements and demonstrating compliance with NTMs can also come at a
considerable cost.

o
o
o
o
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UNDERSTANDING NTMS
NTM OFFICIAL DATA
NTM BUSINESS SURVEY
PROCEDURAL OBSTACLES
PUBLICATIONS
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NEWS & EVENTS

Similarly, national policymakers often lack a clear understanding of what their business sector perceives as
predominant obstacles to trade, which can make it difficult to develop appropriate trade-related policies. At the same
time, while there is an on-going global effort to increase economic liberalization that seek to eliminate or reduce
tariffs, during the past decade there has also been a steady increase in the number of non-tariff measures.

UNDERSTANDING NON-TARIFF MEASURES

NTMs can be broadly defined as policy measures, other than ordinary custom tariffs, that may have an
economic effect on international trade in goods. They may also affect the price of traded goods or in the quantity of
trade goods, or both. Although the use of NTMs is in many cases legitimate - for example to ensure quality or protect
consumers' health - they are also sometimes used as protectionist measures. It is usually difficult to clearly determine
if the purpose of the regulation is for legitimate or protectionist
reasons.

ITCS PROGRAMME ON NON-TARIFF MEASURES

The International Trade Centre's (ITC) programmed on NTMs aims at increasing transparency and help
countries better understand obstacles to trade faced by the business community. In close collaboration with national
and regional stakeholders, ITC is engaged in a multi-agency initiative that assists countries in finding solutions
tailored to meet their specific needs.
The programme consists of two main activities:

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1.

Official NTM data: One part of the project is focused on the collection of official regulation related to
export or import of goods. These regulations are uniformly classified according to measure types using the
international NTM nomenclature that was developed under a multi-agency framework, including ITC, and
led by the United Nations Conference on Trade and Development (UNCTAD). Since the data is collected
from published official sources it is often very reliable. ITC creates a central depository for all the collected
data and disseminates this through its ITCs Market Access Tool.

2.

NTM Business Survey: The second part of the programmed aims to complement the official data
collected by identifying measures that exporters and importers perceive problematic and why. For this
purpose ITC conducts large-scale company-level surveys to identify regulations that are too strict to comply
with and regulations whose compliance is difficult because of related procedural obstacles. ITC collaborates
closely with ministries, export promotion agencies, research institutes, business associations and local experts
in each country.

NON-TARIFF BARRIERS TODAY

With the exception of export subsidies and quotas, NTBs are most similar to the tariffs. Tariffs for goods
production were reduced during the eight rounds of negotiations in the Wotan the General Agreement on
Tariffs and Trade (GATT). After lowering of tariffs, the principle of protectionism demanded the introduction
of new NTBs such as technical barriers to trade (TBT). According to statements made at United Nations
Conference on Trade and Development(UNCTAD, 2005), the use of NTBs, based on the amount and control
of price levels has decreased significantly from 45% in 1994 to 15% in 2004, while use of other NTBs
increased from 55% in 1994 to 85% in 2004.

Increasing consumer demand for safe and environment friendly products also have had their impact on
increasing popularity of TBT. Many NTBs are governed by WTO agreements, which originated in the
Uruguay Round (the TBT Agreement, SPS Measures Agreement, the Agreement on Textiles and Clothing), as
well as GATT articles. NTBs in the field of services have become as important as in the field of usual trade.

Most of the NTB can be defined as protectionist measures, unless they are related to difficulties in the
market, such as externalities and information asymmetries information asymmetries between consumers and
producers of goods. An example of this is safety standards and labeling requirements.

The need to protect sensitive to import industries, as well as a wide range of trade restrictions, available to the
governments of industrialized countries, forcing them to resort to use the NTB, and putting serious obstacles
to international trade and world economic growth.

Thus, NTBs can be referred as a new of protection which has replaced tariffs as an old form of Protection.

[23]

Tariff Barriers v/s Non Tariff Barriers

All countries are dependent on other countries for some products and services as no country can ever hope to be self
reliant in all respects. There are countries having abundance of natural resources like minerals and oil but are
deficient in having technology to process them into finished goods. Then there are countries that are facing shortage
of manpower and services. All such shortcomings can be overcome through international trade. Though it seems
easy, in reality, importing goods from foreign countries at cheap prices hits domestic producers badly. As such,
countries impose taxes on goods coming from abroad to make their cost comparable with domestic goods. These are
called tariff barriers. Then there are non tariff barriers also that serve as impediments in free international trade. This
article will try to find out differences between tariff and non tariff barriers.

Tariff Barriers

Tariffs are taxes that are put in place not only to protect infant industries at home, but also to prevent unemployment
because of shut down of domestic industries. This leads to unrest among the masses and an unhappy electorate which
is not a favorable thing for any government. Secondly, tariffs provide a source of revenue to the government though
consumers are denied their right to enjoy goods at a cheaper price. There are specific tariffs that are a onetime tax
levied on goods. This is different for goods in different categories. There are Ad Valorem tariffs that are a ploy to
keep imported goods pricier. This is done to protect domestic producers of similar products.

Non Tariff Barriers

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Placing tariff barriers are not enough to protect domestic industries, countries resort to non tariff barriers that prevent
foreign goods from coming inside the country. One of these non tariff barriers is the creation of licenses. Companies
are granted licenses so that they can import goods and services. But enough restrictions are imposed on new entrants
so that there is less competition and very few companies actually are able to import goods in certain categories. This
keeps the amount of goods imported under check and thus protects domestic producers.

Import Quotas is another trick used by countries to place a barrier to the entry of foreign goods in certain categories.
This allows a government to set a limit on the amount of goods imported in a particular category. As soon as this
limit is crossed, no importer can import further quantities of the goods. Non tariff barriers are sometimes retaliatory
in nature as when a country is antagonistic to a particular country and does not wish to allow goods from that country
to be imported. There are instances where restrictions are placed on flimsy grounds such as when western countries
cite reasons of human rights or child labor on goods imported from third world countries. They also place barriers to
trade citing environmental reasons.
Tarff for are import for several reasons though basically it may sound the protection for domestic industry is the main
reason. Traffic provide protection domestic industry and basically it is expected that during the initial stages only the
protection should be provided in order to protected the domestic industry form the international competitive product
and therefore economic forget in front the industry forgive for traffic due to traffic the redistribution of income
between consumers and producers texts place it is called as redistribution of income between consumers and
producers texts place it is called as redistribution of transfer effects because money gets transferred from one group
of consumers to another group of producers the government collects revenue due to tariff or custom duties the
revenue collected by the government equals the traffic multiplied by the volume of imports a traffic produces
consumption effects because it reduces total consumption of commodities due to the price rise generally a traffic
causes increase in rice of the protected commodity assuming that a price in the exporting country rise by the full
amount of the tariff sometimes in the imposing g country remains the same which face entire burden is on the
exposing country due to tariff generally imported commodities available in the domestic economy and therefore
rational consumer prefers to off for domestic commodity than the imported one therefore import the bill becomes
lesser which helps to bring down deficit in the balance of payments due to the imposing of tariff as a policy matter
sometimes country has to face the effects and therefore terms on trends suffer imposing
tariff as a policy on the basis of in front industry arrangement allows protection through tariff only during the initial
stages therefore efficiency of the production induces ultimately leads to production of qualitative goods. At the
competitive price due to tarrif the revenue is collected and generated out of which different the works are undertaken
where employment opportunity are created & incomes are generated.

Tariffs Duty
While shipping goods internationally, the government directly charges a duty on a goods for crossing its national
boundary for protection and revenue on a per unit or a value system is known as tariffs. Tariffs collected by the
exporting country are called export tariffs. Levied by a country through which the gods have passed called transit
tariffs. Collected by the importing countries are called import tariffs.

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Revised Cases:
Domestic industries & consumer suffer (job/industry). Promotional of inefficiencies,(infant industry), creating
hardship/poverty in a nation (debatable),could provoke retaliation & trade war.
Solution does not lie retaliatory action but in establishment of Rules & regulation for international trade which result
MINIMAL TRADE DISTORTING activities.

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CONCLUSION
Governmental interference is often argued to be beneficial if it promotes industrialization. Different trade control
instruments are used to improve the economic relations with other countries. A countrys development of an
international strategy greatly depend on trade controls that directly affect price and indirectly affect quantity (traffic,
subsidies, arbitrary customs valuation methods & special fees) and directly affect quantity and indirectly affect price
( quotas VER , buy local, arbitrary standards, licensing arrangements, foreign exchange controls & administrative
delays)
While tariffs having been already brought down substantially in the Uruguay Round, the future efforts are more
likely to concentrate on the non-tariff issues.
It is not true that the non-tariff measures are entirely unnecessary. The WTO Agreements permit the Members to take
measures to protect human, animal or plant life or health, to conserve natural resources or to ensure the quality of
goods finding an access in their markets. Members can also in certain circumstances take specified action to protect
their domestic industry. The non-tariff measures act as barriers if they are applied as protectionist measures in a
disguise. The non-tariff measures need, therefore, to be examined for their consistency with the WTO disciplines and
whether they are applied as a protectionist measures in a disguised form or manner.
If a country feels that non-tariff measures taken against its exports are inconsistent with the WTO provisions, it may
take the matter to the WTO dispute settlement mechanism, besides seeking bilateral consultations. WTO provisions,
however, do not cover all areas and, therefore, some difficulties may be experienced where WTO provisions do not
exist. Even where the measures are consistent with the WTO provisions, most of the agreements envisage special and
preferential treatment for the developing country members. Bilateral consultations can perhaps hell a lot in this
regard.

BIBLIOGRAPHY

WEBSITES

[27]

www.asiatrade .com
www.google.com
www.mecklai.com
www.wipro.com
http://en.wikipedia.org
http://en.wikipedia.org/wiki/ETrace

BOOKS
1. Non-Tariff Barriers affecting Indian exports- Raj Mehta
NEWS PARERS
The Economic Times
Business Line

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