Non-Tariff Barriers
Numerous limitations a nation imposes on the import of products and services from other countries
What are Non-Tariff Barriers?
Tariff barriers, often known as trade barriers, relate to the numerous limitations a nation imposes on the import of products and services from other countries. Tariff and non-tariff barriers are the two main categories of these restrictions.
Trade barriers are broadly defined as all types of artificial restrictions that obstruct regular trade and interfere with market competitiveness, such as:
- Import duties or other duties of equivalent effect
- Various quantitative restrictions on the circulation of commodities
- Various discriminatory measures or practices between producers, buyers, or users (especially about prices or trading conditions and freight)
- Various subsidies or unique burdens imposed by the state
- Various restrictive practices to divide the market or to obtain additional profits.
Despite significant advancements in tariffs, the General Agreement on Tariffs and Trade's labor trade barriers, merchandise trade barriers, and tariff liberalization have had limited impact in other areas.
Various trade barriers have been introduced, with some trade barriers being eased while others being strengthened.
The non-member tariff barriers are still in place, notwithstanding the growth in membership of international trade organizations like the WTO and the creation of several regional organizations like the North American Free Trade Area.
However, it is essential to note that there is an increase, or upward trend, in the significance of international non-tariff barriers.
Some developed countries use their technological advantages to require certification of products from other countries. This can significantly hinder the export of manufactured products from underdeveloped and developing countries; only some resource-based primary products can be produced.
The economic and trade development gap between the North and South has been exacerbated. In addition, the anti-dumping measures increasingly adopted by developed countries, some less-developed, and even developing countries are one of the non-tariff barriers.
Types of Nontariff Barriers
There are many trade barriers, and countless trade barriers apply to other nations. Therefore, the list that follows is not all-inclusive.
According to the practice of trade barrier investigations of WTO members such as the United States and the European Union, these barriers are mainly manifested in the following forms:
Customs & Administrative Entry Procedures
When going through the customs & administrative entry procedures, the importer is typically required to provide complicated to obtain information, even trade secret information.
This drives up the cost of imported goods and prevents them from entering the importing country's market smoothly. In addition, the customs clearance process is also time-consuming, making seasonal imports difficult.
Intellectual Property Rights Measures
The following are the primary manifestations of some WTO members' actions that, in terms of trade-related intellectual property measures, violate the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and serve as trade barriers:
The law is not perfect, some intellectual property rights are not covered by it, or some of its provisions go against the fundamental tenets of the TRIPS Agreement.
Administrative enforcement processes are time-consuming, expensive, or demanding.
Lack of adequate protection for intellectual property rights due to insufficient legal remedies or loss of the parties' right to ask for judicial review.
Import ban
Measures to limit or forbid imports outside the scope of the WTO exclusions are called import bans (such as general exceptions stipulated in Article 20 of GATT, security exceptions specified in Article 21, etc.).
Import license
Automatic and non-automatic import licenses are the two categories of import licenses.
Non-automatic licenses are those that must pass the approval process. They can be further broken down into claims with quantitative restrictions (typically import quota management) and rights without quantitative restrictions.
Automatic licenses can be obtained without approval (usually a single import license).
Trade obstacles in managing import quotas can take the form of unfair distribution, an excessive quantity of rations, or both.
Trade barriers in the management of a single import license typically take the following forms:
- A lack of transparency in the management process
- Excessive complexity or documentation requirements in the review and licensing processes
- A lengthy approval process
Technical Trade Barriers
The relevant provisions of the WTO Agreement on Technical Barriers to Trade grant WTO members the authority to develop and put into effect policies that serve to safeguard interests in national or regional security as well as:
- the welfare of people and animals,
- technical norms, standards, and
- conformity assessment methods
All this is to establish if a product complies with technical laws and standards to save human life or plant life, protect the environment, stop fraud, ensure the quality of export products, etc.
Technical norms, standards, and conformity assessment procedures are the three categories into which the measures above, also known as TBT, can be classified.
Nontariff Barriers Characteristics
These barriers have the following three distinctive qualities as opposed to tariff barriers:
1. These measures are more flexible and targeted than tariffs
The formulation of tariffs often requires specific legislative procedures.
Specific legal procedures and formalities are also required to adjust or change the tax rate. Therefore, tariffs have a certain continuity.
Administrative procedures are usually adopted for formulating and implementing non-tariff measures, which are quicker to formulate and more straightforward to implement.
Corresponding import restriction measures can be lifted or amended for a specific country and a particular commodity at any time to quickly achieve the import restriction barriers.
2. The protective effect of non-tariff barriers is stronger and more direct than that of tariffs
The protective effect of tariff measures is indirect since they raise the cost and price of goods by applying tariffs, which reduces their ability to compete.
Some non-tariff measures, like import quotas, pre-limit the quantity and amount of imports and immediately forbid imports if the quota is exceeded. This makes it possible to rapidly and directly accomplish goals that are challenging to achieve by tariff measures.
3. These barriers are more covert and discriminatory than tariffs
Exporters can quickly get pertinent information since tariff measures, including the selection and collection of tax rates, are transparent.
Tariff measures are governed by bilateral ties and global multilateral trade agreements and are less discriminating. However, some non-tariff steps frequently lack transparency, are kept secret, and are pretty specific, making it simple to discriminate against other nations.
Nontariff Barriers Main Impact
These barriers have a wide variety of names and involve many areas. Therefore, it is difficult to estimate the impact of such barriers on international trade and related import and export countries, but it can be seen from the following aspects:
1. Impact on the development of international trade
These barriers significantly hamper the growth of international trade. In the absence of other factors, the level of global non-tariff walls is inversely related to the expansion of international commerce.
For instance, after the Second World War, tariffs were significantly reduced from the 1950s to the early 1970s.
At the same time, many developed countries also significantly loosened or even eliminated non-tariff measures like import quantity restrictions, which, in some ways, helped to advance global trade.
The average annual growth rate of world commerce volume from 1950 to 1973 was 7.2%.
On the other hand, after the mid-1970s, many nations enacted these barriers, which impacted how international trade developed. As a result, global trade's average annual growth rate was 4.5 percent from 1973 to 1979 and just about 3 percent from 1980 to 1985.
2. Impact on commodity structure and geographic direction
These barriers also have a minimal impact on international commerce's geographic direction and commodity structure.
Since World War II, the trend in the products affected by these barriers has been that agricultural trade is impacted more than industrial goods, labor-intensive products are impacted more than technology-intensive outcomes, and the commonly affected countries have developing and emerging economies.
More socialist nations exist than industrialized nations, and the former's severity is greater.
These phenomena have severely harmed the development of foreign commerce in developing nations and socialist countries. This has significantly impacted changes in the composition and geographic focus of international commodity trading.
3. Impact on importing countries
These barriers for the importing country can limit imports and safeguard its market and production while driving up domestic market prices.
For instance, if the importing nation adopts direct import quantity restriction measures, the import will not increase regardless of whether the international price increases or decreases or how high the home demand is.
Domestic prices will increase, safeguarding the production of comparable goods in the importing country.
Under some circumstances, this could help safeguard and promote the production and advancement of related goods in that nation.
The cost of local export goods and export prices will also rise due to the price increase, making consumers in importing nations pay a significant fee for strengthening non-tariff barriers.
They will have to spend more money to buy the items they need, reducing the ability of export items to compete.
The government must implement policies like export subsidies to boost exports, which may increase state budget spending and the tax burden on the populace.
4. Impact on exporting countries
The imposition of direct import quantity restrictions and the setting of an import quantity limit, in particular, will significantly impact the export quantity and price of goods in exporting countries. These factors can result in a decline in the growth rate or amount of exported goods and a rise in export prices.
Generally speaking, these barriers of an importing country will have less of an impact on the price of the export commodities of the exporting country if their supply elasticity is higher.
If the price of a commodity is low, the influence of non-tariff barriers in importing countries will cause an even more significant price decline.
Since most developing countries have a less elastic supply of export products, the strengthening of non-tariff barriers worldwide has caused severe damage to developing countries.
Example of Nontariff Barriers
All beer and soda must be served in recyclable bottles, according to a 1981 Danish governmental decree.
The decision was made because an increasing quantity of non-recyclable beer bottles and other bottles threaten the long-established, efficient glass recycling and processing infrastructure.
The Commission of the European Communities considers the regulation a trade barrier that restricts the free flow of products within the Union because it places higher costs on imported goods than on Danish ones.
The European Community Court of Arbitration took up the matter in 1986.
The Community Commission argued that Danish law went against the fundamental rule stipulating that some commodities might automatically travel between countries after being sold in one nation.
While not expressly prohibited, foreign goods providers encounter more challenges when constructing processing systems for reusable bottles.
The Committee concluded that the statute unfairly treated foreign manufacturers. However, the Committee also thinks that alternative strategies, such as recycling and volunteer collection programs, can adequately safeguard the environment and that the legislation is not a substitute for environmental sustainability.
A court upheld Denmark's regulations requiring mandatory container reuse in September 1988.
In the interest of environmental protection, the court upheld the right to make exceptions to the general rule of free movement of goods.
Various nations' adoption of different regulations will cause trade uncertainty if the EU does not have specific laws for a given area.
The court determined that the restriction was "appropriately matched" to the aim since the use of recyclable beverage packaging was required to ensure high rates of beverage packaging recycling.
However, the type of container bottle required by Danish law was not allowed. After 1984, foreign companies' products must be packaged in Danish-made or -approved bottles (only used during the inspection of the goods and limited in quantity).
The reason for enacting the bottle and container approval restrictions is that it is hard to build a successful recycling system if numerous types of containers are available on the market.
By adjusting the bottle type, one may regulate the variety of categories. The court determined that while recycling bottles and cans did not ensure a high percentage of waste was recycled, it did safeguard the environment.
Few alcoholic beverages are imported into Denmark due to this court decision.
The court subsequently concluded that the significant losses to foreign suppliers were outweighed by the environmental advantages of required recognition of bottle types.
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