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Tariff and Non Tariff Barriers

Overview


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Trade Barriers

Used to encourage and protect existingdomestic industry

Trade barriers are Tariffs that

Increase Trade Weaken Trade Restrict Trade

Quotas Boycotts and Embargoes


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Impact of Tariff (Tax) Barriers

Tariff Barriers tend to Increase :1. Inflationary pressures2. Special interests privileges 3. Government control and political considerations in

economic matters4. The number of tariffs they beget via reciprocity

Tariff Barriers tend to Weaken :1. Balance-of-payments positions2. Supply-and-demand patterns3. International relations (they can start trade wars)


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Non Tariff - Trade Barriers

Non Tariff barriers - are another way for ancountry to control the amount of trade that itconducts with another country, either for

selfish or altruistic purposes. Any barrier totrade creates an economic loss, which meansit does not allow the markets to functionproperly.


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2) Customs and Administrative EntryProcedures:

Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees

1 ) Specific Limitations on Trade Quotas Import Licensing requirements Proportion restrictions of foreign to domestic

goods (local content requirements)

Minimum import price limits Embargoes

Six Types of Non-Tariff Barriers


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(3) Standards:1. Standard disparities2. Intergovernmental acceptances of

testing methods and standards

3. Packaging, labeling, and marking(4) Government Participation in

Trade:1. Government procurement policies

2. Export subsidies3. Countervailing duties4. Domestic assistance programs

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


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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

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


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Mangoes Philippines Restrictions

It is a common practice inmany countries to use non-tariff barriers to control theentry of imports.

For instance, Philippinemangoes and bananashave to meet strict

phytosanitary requirementsfrom the US and

Australia.


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McDonald France Big Beef

McDonalds France in 1998, ran a print ad campaign featuringoverweight cowboys complainingabout the fact that McDonald'sFrance refuses to buy American beef

but uses only French, to "guaranteemaximum hygienic conditions" anunsubtle effort to identify the GlobalArches with European efforts to

block the import of hormone-lacedAmerican beef. (Karon, 2002)


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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 asimport 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)


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Summary

Although tariffs have significantly reducedover the last twenty years in global trade.

Bigger concern is the dismantling of non-

tariff barriers that restrict trade from lessdeveloped countries.

The agricultural sector has had its high

share of discriminatory trade practices toprotect inefficient producers.

Tariffs distort trade flows

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