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: Inflationary pressures Special interests’ privileges Government control and political considerations in economic matters The number of tariffs they beget via reciprocity Tariff Barriers tend to Weaken: Balance-of-payments positions Supply-and-demand patterns 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 quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. For example, a country might limit sugar imports to 50 tons per year. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy. Import Licensing Procedures says import licensing should be simple, transparent and predictable. For example, the agreement requires governments to publish sufficient information for traders to know how and why the licences are granted.

Six Types of Non-Tariff Barriers (cont'd.) (3) Standards: Standard disparities Intergovernmental acceptances of testing methods and standards Packaging, labeling, and marking (4) Government Participation in Trade: Government procurement policies Export subsidies Countervailing duties 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.

Mangoes Philippines – Restrictions It is a common practice in many countries to use non- tariff 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)