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Non-Tariff Barriers

There are several different variants of division of non-tariff barriers. Some scholars divide between internal taxes, administrative barriers, health and sanitary regulations and government procurement policies. Others divide non-tariff barriers into more categories such as specific limitations on trade, customs and administrative entry procedures, standards, government participation in trade, charges on import, and other categories.

Policy Purpose Examples Potential Consequences
Protectionist policies To help domestic firms and enterprises at the expense of other countries. Import quotas; local content requirements; public procurement practices Challenges levied at WTO and other trade forums
Assistance policies To help domestic firms and enterprises, but not at the expense of other countries. Domestic subsidies; antidumping laws; industry bailouts. Adversely affected countries may respond to protect themselves (i.e.,imposing countervailing duties and subsidies).
Nonprotectionist policies To protect the health and safety of people, animals, and plants; to protect or improve the environment. Licensing, packaging, and labeling requirements; sanitary and phytosanitary (SPS) rules; food, plant and animal inspections; import bans based on objectionable fishing or harvesting methods. Limited formal consequences lead to efforts to establish common standards or mutual recognition of different standards.

 Alan Deardorff, “Easing the burden of non-tariff barriers” (International Trade Center, October 1, 2012). Cited in NONTARIFF BARRIERS TO TRADE RATE Summary - US Agency for International Development

Licenses

The most common instruments of direct regulation of imports (and sometimes export) are licenses and quotas. Almost all industrialized countries apply these non-tariff methods. The license system requires that a state (through specially authorized office) issues permits for foreign trade transactions of import and export commodities included in the lists of licensed merchandises. Product licensing can take many forms and procedures. The main types of licenses are general license that permits unrestricted importation or exportation of goods included in the lists for a certain period of time; and one-time license for a certain product importer (exporter) to import (or export). 

Quotas

Licensing of foreign trade is closely related to quantitative restrictions – quotas - on imports and exports of certain goods. A quota is a limitation in value or in physical terms, imposed on import and export of certain goods for a certain period of time. This category includes global quotas in respect to specific countries, seasonal quotas, and so-called "voluntary" export restraints. Quantitative controls on foreign trade transactions carried out through one-time license.

Quantitative restriction on imports and exports is a direct administrative form of government regulation of foreign trade. Licenses and quotas limit the independence of enterprises with a regard to entering foreign markets, narrowing the range of countries, which may be entered into transaction for certain commodities, regulate the number and range of goods permitted for import and export. However, the system of licensing and quota imports and exports, establishing firm control over foreign trade in certain goods, in many cases turns out to be more flexible and effective than economic instruments of foreign trade regulation. This can be explained by the fact, that licensing and quota systems are an important instrument of trade regulation of the vast majority of the world.

Embargo

Embargo is a specific type of quotas prohibiting the trade. As well as quotas, embargoes may be imposed on imports or exports of particular goods, regardless of destination, in respect of certain goods supplied to specific countries, or in respect of all goods shipped to certain countries. Although the embargo is usually introduced for political purposes, the consequences, in essence, could be economic.

Standards

Standards take a special place among non-tariff barriers. Countries usually impose standards on classification, labeling and testing of products in order to be able to sell domestic products, but also to block sales of products of foreign manufacture. These standards are sometimes entered under the pretext of protecting the safety and health of local populations.

Administrative and bureaucratic delays at the entrance

Among the methods of non-tariff regulation should be mentioned administrative and bureaucratic delays at the entrance, which increase uncertainty and the cost of maintaining inventory. 

Import deposits

Another example of foreign trade regulations is import deposits. Import deposits is a form of deposit, which the importer must pay the bank for a definite period of time (non-interest bearing deposit) in an amount equal to all or part of the cost of imported goods.

At the national level, administrative regulation of capital movements is carried out mainly within a framework of bilateral agreements, which include a clear definition of the legal regime, the procedure for the admission of investments and investors. It is determined by mode (fair and equitable, national, most-favored-nation), order of nationalization and compensation, transfer profits and capital repatriation and dispute resolution.

Foreign exchange restrictions and foreign exchange controls

Foreign exchange restrictions and foreign exchange controls occupy a special place among the non-tariff regulatory instruments of foreign economic activity. Foreign exchange restrictions constitute the regulation of transactions of residents and nonresidents with currency and other currency values. Also an important part of the mechanism of control of foreign economic activity is the establishment of the national currency against foreign currencies.

Non-tariff barriers to trade can be the following:

  • Export restrictions
  • General or product-specific quotas
  • Rules of Origin
  • Quality conditions imposed by the importing country on the exporting countries
  • Sanitary and phytosanitary conditions
  • Packaging conditions
  • Labeling conditions
  • Product standards
  • CIncompatible conventions for contracts
  • Determination of eligibility of an exporting country by the importing country
  • Determination of eligibility of an exporting establishment (firm, company) by the importing country.
  • Additional trade documents like Certificate of Origin, Certificate of Authenticity etc.
  • Occupational safety and health regulation
  • Employment law
  • Import licenses
  • State subsidies, procurement, trading, state ownership
  • Export subsidies
  • Minimum import pricing
  • Differences of Product classification
  • Quota shares
  • Foreign exchange market controls and multiplicity
  • Inadequate infrastructure
  • "Buy national" policy
  • Over-valued or under-valued currency.
  • Intellectual property laws (patents, copyrights); differences of view on applicability of patents (for example, DNA, software) or longevity of copyrights.
  • Restrictive licenses
  • Seasonal import regimes
  • Corrupt and/or lengthy customs procedures
  • Protected designation of origin, protected names (for example, Champagne)


Sources:

Non-tariff barriers  – Southern African Development Community

UNDERSTANDING THE WTO: THE AGREEMENTS Non-tariff barriers 

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