Explain various non-tariff barriers to restrict the international trade.
The various are the non-tariff barriers to restrict the international trade:
- Customs Classification and Valuation.
- Technical Standards and Health Regulations.
- Anti-dumping Restriction.
- Government Procurement.
- Local Content and Foreign Investment Performance Requirement.
- Regulations on Services
Quotas are quantitative restrictions. Quotas may be of following types:
Import Quotas: Import quotas are quantitative restrictions on the volume of goods imported. Import quotas require import licenses to be obtained by individual traders. Import quotas may be unilateral quotas, negotiated bilateral or multilateral quotas and tariff quotas.
Unilateral quota is imposed and administered by the importing country. It may be with reference to the total volume to be imported or with reference to the quota assigned to individual countries from which the quota can be imported. Negotiated bilateral or multilateral quotas ease the administrative as well as political difficulties of unilateral quotas.
The importing country negotiates with the concerned countries about the allotment of quotas by definite shares. Tariff quota is a specified quantity of a product which is permitted to enter the country at a given rate of duty or even duty free. Any additional quantity that may be imported, may pay a higher duty. Thus, a tariff quota combines the features of both a tariff and a quota.
Export Quotas: Export quotas are also administered by licensing. Export quotas are quantitative restrictions by governments to prevent strategic goods from reaching the hands of an enemy country, to meet internal demand or to permit export of only surpluses to achieve production and price stability. Export quotas can be imposed unilaterally, bilaterally or multilaterally negotiated with importing countries.
Customs Classification and Valuation.
There may be government policies and administrative practices that also discriminate against imports or discriminate in favor of exports. They may be either by way of discriminatory taxes and valuations for the purpose of customs clearances. When a tariff is ad valorem, the duty imposed on imported goods depend on its classification in the tariff schedule. Ambiguous rules of classification provide custom authorities plenty of opportunity for arbitrary classification and determining value of imported goods.
Another form of non-tariff barrier is grant of subsidies to domestic producers or exporters to stimulate the expansion of indigenous industry. Subsidies may be granted by way of tax exemptions, cash disbursements, preferential exchange rates, government contracts with special privileges or some other favorable treatment.
Subsidies help local manufactures to enjoy cost advantage and to be cost competitive. Government provides a number of export assistance to exporters to make the export business more profitable. Subsidy, for all practical purposes, is an indirect form of protection of local industry.
Technical Standards and Health Regulations.
An other form of non-tariff barrier is imposition by importing country of many regulations with respect to safety, health, marking, labeling, packaging and technical standards, quality standards and natural environment. Such type of regulations and standards discriminate against imports by posing hardships on foreign producers and obstruct the flow of foreign goods into the country.
Dumping means that a product is sold in foreign market at a lower price than it is sold in exporting country’s market. To counter such practice the government of importing country may impose anti-dumping regulations. A government may impose anti-dumping duty to nullify the harmful effects of the lower dumping price on domestic producers.
Sometimes a government may adopt a policy to give preference to domestically produced goods. Almost all countries practice procurement discrimination through administrative procedures. Such type of policy discriminates in favor of local goods against foreign goods.
The very large number of goods and services directly purchased by governments and enormous influence they can exert over the procurement policies of public sector and private sector.
Local Content and Foreign Investment Performance Requirement.
A government may impose local content regulations on certain industries so as to promote import substitution. Sometimes a government may also encourage the domestic producers for import substitution.
Under this, a certain percentage of inputs used in the manufacture of goods are required to be procured from the domestic suppliers only. Similarly foreign investors may be asked to export a certain proportion of its output from the domestic country under the foreign investment performance requirement.
Regulations on Services.
Countries all-over the world impose.restrictions to curtail trade in services e.g. banking, transportation, communication, tourism, education, franchising, construction etc. Restrictions on international trade in services distort the location of service activities and add to their costs.