Tariff and Non Tariff Barriers

Overview

Trade Barriers
Used to encourage and protect existing domestic industry Trade barriers are Tariffs that Increase Trade Weaken Trade Restrict Trade Quotas Boycotts and Embargoes

Impact of Tariff (Tax) Barriers

Tariff Barriers tend to Increase: 1. Inflationary pressures 2. Special interests privileges 3. Government control and political considerations in economic matters 4. The number of tariffs they beget via reciprocity Tariff Barriers tend to Weaken: 1. Balance-of-payments positions 2. Supply-and-demand patterns 3. International relations (they can start trade wars)

Non Tariff - Trade Barriers

Non Tariff barriers - are another way for an country to control the amount of trade that it conducts with another country, either for selfish or altruistic purposes. Any barrier to trade creates an economic loss, which means it does not allow the markets to function properly.

Six Types of Non-Tariff Barriers

1) Specific Limitations on Trade
Quotas Import Licensing requirements Proportion restrictions of foreign to domestic goods (local content requirements) Minimum import price limits Embargoes 2) Customs and Administrative Entry Procedures:
Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees

Six Types of Non-Tariff Barriers (cont'd.)

(3) Standards: 1. Standard disparities 2. Intergovernmental acceptances of testing methods and standards 3. Packaging, labeling, and marking (4) Government Participation in Trade: 1. Government procurement policies 2. Export subsidies 3. Countervailing duties 4. Domestic assistance programs

Six Types of Non-Tariff Barriers (cont'd.)

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

Apples Banned - Non Tariff Barrier

New Zealand's apples account for a third of its agricultural exports but have been banned from Australia since 1921 due to fears about the spread of fire blight, a crop pest.

By Doug Latimer in Sydney Published: 1:00AM BST 13 Apr 2010

Mangoes Philippines Restrictions

It is a common practice in many countries to use nontariff barriers to control the entry of imports.

For instance, Philippine mangoes and bananas have to meet strict phytosanitary requirements from the US and Australia.

McDonald France Big Beef

McDonalds France in 1998, ran a print ad campaign featuring overweight cowboys complaining about the fact that McDonald's France refuses to buy American beef but uses only French, to "guarantee maximum hygienic conditions" an unsubtle effort to identify the Global Arches with European efforts to block the import of hormone-laced American beef. (Karon, 2002)

General Agreement on Tariffs and Trade

Paved the way for the first effective worldwide tariff agreement. Basic Elements of the GATT: Trade shall be conducted on a non-discriminatory basis. Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas. Consultation shall be the primary method used to solve global trade problems. Eliminating barriers to international trade (Uruguay Round): The General Agreement on Trade in Services (GATS) Trade-Related Investment Measures (TRIMs) Trade-Related Aspects of Intellectual Property Rights (TRIPs)

Summary
Although tariffs have significantly reduced over the last twenty years in global trade. Bigger concern is the dismantling of nontariff barriers that restrict trade from less developed countries. The agricultural sector has had its high share of discriminatory trade practices to protect inefficient producers. Tariffs distort trade flows