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This report examines tariff and non-tariff policies restrict trade between countries in

agricultural commodities. Many of these policies are now subject to important 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, are among the oldest forms of government intervention in economic activity. They are implemented for two clear economic purposes. First, they provide revenue for the government. 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 most developed 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. A tariff-rate quota (TRQ) combines the idea of a tariff with that of a quota. The typical TRQ 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 common non-tariff barrier (NTB) was the so-called voluntary export restraint (VER) under which exporting countries would agree to limit shipments of a commodity to the importing 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 because 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 GATT 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. In order to pay a relatively low import duty on imported tobacco, Australian cigarette manufacturers 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 lessdeveloped 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 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).

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.



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. 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: 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) 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. 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 & labelsArbitrary 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. 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. ]



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 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. 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


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 non-tariff 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 Example of the popular NTBs.


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 so-called "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 antidumping 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.

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-favored-nation), 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. 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 (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.


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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.


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



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: 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.


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

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.

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.



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.



WEBSITES www.asiatrade .com

BOOKS 1. Non-Tariff Barriers affecting Indian exports- Raj Mehta

NEWS PARERS The Economic Times Business Line