• Define barriers to trade
• Understand the reason for tariffs as
Learning barriers to trade
• Distinguish tariff barriers from non-tariff
objectives barriers
Measures that governments or
public authorities introduce to
make imported goods or services
less competitive than locally
produced goods and services.
What is a
Trade Barrier?
Domestic companies receive a
competitive advantage relative to
their foreign counterparts.
• Zambian industry produces 2.5 litre
cooking oil with a retail price of K30
• South Africa produces 2.5 litre cooking oil
Example that will have a retail price of K30 on
Zambian market
• 10% tariff imposed on the imported
cooking oil, increasing price to K33 on
Zambian market
To Protect infant industries
To protect domestic employment
Rationale for To protect consumers
Trade Barriers
Encourage local production to replace imports.
To ensure national security by protecting defence
oriented industries
Encourage local and foreign direct investment.
Reduce balance of payments problems.
Rationale for Promote export activity
Trade Barriers
To prevent dumping
Promote political objectives
Categories of Trade Barriers
Tariffs
Non-tariff barriers e.g.
• import quotas,
• tariff rate quotas,
• trade marketing agreements
• Import licences
What is a Tariff?
• A financial charge or tax on goods that are imported into a
country or region
• It raises the domestic price of the imported goods and limits the
volume of imports, thereby protecting local industries
• Provides revenue for the government
Types of tariffs
• Ad valorem Tariff
• Ad valorem is Latin for “according to value”.
• Levied on a product based on a percentage of that products value.
• Specific Tariff
• A fixed fee levied on an imported product, based on its weight, quantity or
volume
• e.g. a country could levy a $15 tariff on each pair of shoes imported
• Mixed Tariff ( Compound Duty)
• combines aspects of ad valorem and specific tariffs
• An ad valorem duty to which a specific duty is added or subtracted
• Tariff Rate Quotas (Tariff Quotas)
• A specific number of goods, which are up to a quota limit, are imported at a
lower tariff rate than goods in excess of the quota limit
The GATT and Tariffs
A central purpose of the GATT is to reduce and bind
tariffs
• Tariff rates are made binding by including them in schedules
of concessions that are annexed to the GATT
• This is made possible by GATT Article II
Member states are under an obligation to
accord tariff treatment that is no less
favourable than that which is provided
Tariffs and
for in the schedule to other member
states
GATT
Article II A member state cannot levy a customs
duty on imported goods that is in excess
of that which is notified in the schedule
to the GATT
Non-tariff barriers to imports
• Gained ground as a result of continuous negotiations
by WTO member states to cut tariffs
• Decrease imports by:
• Setting an import quota
• Quantitative restrictions through discrimination
by quantity or content
Quotas
• Quotas are numerical restrictions on imports or
exports
• Once the mandated quantity limit is reached, further
units are barred
• Usually expressed in terms of units of products
Selective
Quota
Import Quota
Global
Quota
Types of
quotas
Tariff Rate Quota
GATT Article XI: Quantitative
Restrictions
• Prohibits imposition of quantitative
restrictions on imported and
exported goods
• Trade restrictions that are allowed
may be in the form of duties, taxes
or other charges
• Prohibitions, quotas or licensing
(quantitative restrictions) are not
allowed
• Restrictions or prohibitions that are a temporal
relief for critical shortage of foodstuffs and
other essential products for a country
• Restrictions or prohibitions that are necessary
for the application of standards or regulations
for the classification grading or marketing of
commodities
• Restrictions on import of agricultural products
or fisheries which enforce the following
Exceptions government measures:
• Restrictions on the production and selling of
domestic like products
• Removal of a temporary surplus of a like domestic
product
• GATT Article XX
• To correct balance of payments problems
• For purposes of national security (Article XXI)
Licensing
• Import and export licensing can be defined as administrative
procedures requiring the submission of an application or
other documentation (other than those required for customs
purposes) to the relevant administrative body as a prior
condition for importation or exportation of goods.
Technical barriers
to trade
• Procedure for verifying compliance e.g. testing and certification
procedures can be barriers to trade
• The requirements that the characteristics of a product must conform
to.
• Must not be unrealistic and unreasonable
• Where reasonable may be so wide as to cause a barrier to trade
• This is controlled by Technical Barriers to Trade Agreement
Sanitary and phytosanitary
measures
• Health and safety measures
• Can be barriers to trade
• Must be based on international standards that are provided
for in the SPS Measures Agreement
Orderly marketing
agreements
• Market sharing pact signed by trading partners
• Intended to protect less efficient domestic producers
• Usually involve voluntary export restraints, or
export quotas
Other non-tariff barriers
• Formal agreements between exporting and importing
countries that stipulate the import or export quotas
each nation will have for a good
• Non - quantitative Nontariff Barriers
• Direct government participation in trade
• Customs and other administrative procedures
• See: EC-Customs classification of certain computer
equipment 1998 (“LAN case”)
The End
