Concept of Protectionism:

Trade Barriers-
Tariff and Non-Tariff Barriers
 Tariff Barriers
Tariffs, which are taxes on imports of commodities into a country or region. They are implemented for two economic purposes :

◦ Revenue Generation
◦ Protection for Domestic
producers
Tariff Barriers include:

Export Subsidies & Domestic Support

Dumping
Quota
Export Controls
 Domestic Support
National policies that support domestic prices or
subsidized production often encourage over
production.

This squeezed out imports in international

markets and block entry of developing
countries.

As per WTO, the domestic support in the

agriculture sector is categorized by green, and
amber boxes.
Green Box : All subsidies that minimal
trade distorting effects and do not have the
‘effect of providing price support to
producers’, exempt for reduction
commitments. Following subsidies are
allowed:

◦ Government expenditure on agricultural

research, pest control, marketing, and
promotional services. Payment for natural
disaster; Payment under environmental
programmes.
Amber Box:
This category of domestic support refers
to the amber colour of traffic lights, which
means ‘slow down’. As per AOA
agreement :

Minimal supports are allowed (5% of

agricultural production for developed
countries, 10% for developing countries).
 Export Subsidies
 Transportation charges financed by
government to send consignment from
factory to port.

 Provide finance assistance in terms of

export credit at lower rate of interest.

The Agreement on Agriculture prohibits

export subsidies. WTO members to cut
subsidies.
 The Agreement on Subsidies and
Countervailing Measures
This agreement (SCM) administers the use
of subsidies and regulates on the basis of
following ways:

◦ The importing country can use the WTO’s

dispute settlement procedure to seek the
withdrawals of the subsidy.
◦ Importing country can launch its own
investigation and charge extra duty
(countervailing duty) on subsidized imports.
 Countervailing Duty Cases Filed
Against Fastener Imports From China
and Taiwan
US. Department of Commerce and the
U.S. International Trade Commission
reported against imports of standard
fasteners from China and Taiwan.

The petitions, which were filed on behalf

of Nucor Fastener, against Chinese
exports of standard fasteners.
These exports, such as structural bolts,
nuts, and cap screws, have received
subsidies from the Chinese government,
and Chinese and Taiwanese producers of
fasteners are dumping their products in
the United States.

The petitions imposed average dumping

margins for Chinese imports of 145
percent, and of 74 percent for imports
from Taiwan.
 Dumping
A product is considered to be dumped
if:

◦ The export price is less than the cost of

that product in the exporting country.

Anti-dumping measures can only be applied

if the dumping is hurting the industry in the
importing country.
 Anti -Dumping Measures
Internationalmarket competition get
distorted mainly by unfair trade practices
as:

◦ If exported goods are dumped in overseas

markets.

The agreement on ‘Anti-dumping’ Practices

(ADP) authorizes importing countries to levy
compensatory duties on import of products.
 India and US on Anti-dumping
Measures relating to Shrimp

•The US Southern Shrimp Alliance (SSA)

– an alliance of eight southern coastal
States representing the harvesters,
processors and distributors of US wild
caught shrimp, filed a petition in 2003 in
the US Department of Commerce (DOC).
The petition was the exporters from Thailand,
China, Vietnam, India, Brazil and Ecuador
were selling shrimp at lower prices than in
their home markets and were materially
injuring the domestic industry in the US.

This was justified by showing the sudden drop

in the harvest of Shrimp by more than half
from $1.25bn in 2000 to $560mn during 2002
in the US market.
Imposition of anti-dumping duty by the
US on Indian shrimp impacted export of
marine products to the US, which declined
by 21.6 percent to 43,758 tonnes in
2006-07 as against 55,817 tonnes in
2005-06.

Recently, US has decreased its anti-

dumping duty to 1.69 per cent from 14
per cent on shrimp exports.
Quota:
Quantitative restriction on the importation of
goods in terms of units (e.g. 10,000 shirts)

Unlike tariff, Quotas hold the promise of

definitive, quantifiable protection of
domestic producers.


Export Controls :

It is to be used to prevent the export of

goods that are vital to domestic industry
and nation as per requirement. It
includes:

 Export control on Some natural

resources, oil and grains etc.

Export control on arms and weapons.

 Non-Tariff Barriers

Any restriction imposed on the free flow of

goods apart from tariffs is non-tariff
barriers to trade.

Such barriers are often criticized because

of lack of transparency.
Growing use of unconventional Non-tariff
barriers such as:

Import Policy Barriers (Requirement

of import License )
Embargo and Boycotts
Customs valuation
Pre-shipment Inspection
Health and safety measures
Labour Law
Environmental controls
 Non-Tariff Barriers
Import Licensing Procedures :

◦ It is generally considered as complex and non-

transparent, which block market entry of foreign
products.

◦ Concern importing country issues license which

takes 30-60 days to deal with an application.

◦ For simplification purpose, WTO has introduced

an agreement which sets criteria for automatic
issuance of some licenses so that the procedures
do not restrict trade.
Embargoes and Boycotts :

Embargo is the prohibition on exportation

to a designated country.

Example:

US has applied an embargo primarily

to Iraq and Iran.
Boycotts

Itis prohibition on importation of all or

some goods and services from a
designated country.

Example: U.S. medical equipment

company was fined for supporting Arab
boycott against Israel.
Customs Valuation :

◦ This agreement aims a fair, uniform and

neutral system for the valuation;

◦ Custom can reject the transaction value in

such situations only if it has reasons to
doubt the truth or accuracy of the declared
price of the imported good.
Agreement on Custom Valuation of WTO
require national legislation on the
following rights:

• Rights to withdraw imported goods from

customs, when there is likely to be delay
in determination of custom value.

•Right to appeal without fear of penalty.

Pre-shipment Inspection:

◦ The basic purpose of pre-shipment inspection is

to check shipment details (price, quantity and
quality of goods) ordered overseas.

◦ The agreement establishes an independent

review procedure administered jointly by the
International Federation of Inspection Agenc-
ies (IFIA), representing inspection agencies
and International Chamber of Commerce (ICC),
representing exporters.
 Environmental Issue

The shrimp and turtle case brought up by

the US against some developing nations
to monitor environmental governance.

It all started in 1989 when the US

Congress passed a law to prohibit the
import of shrimp harvested in ways which
were harmful to sea turtles, which are
listed in the Endangered Species Act.
The contention was that turtles
should not be killed while harvesting
shrimps and The use of turtle
excluder devices (TEDs) to minimize
turtle kills was also recommended.