Trade Barriers

Every country has to regulate its intl. trade & so it imposes certain restrictions on its trade i.e, imports & exports. These restrictions are known as Trade barriers. These can be

1. 2.

Tariff barriers Non tariff barriers

TARIFFS

One of the classical methods of regulating IT. They are referred to as taxes levied on imports. Aim at restricting inward flow of goods by making imports costlier. They are also a source or income to the govt, of importing country. It is also imposed to influence the policies of a country ( protest in result of tariff imposed by a particular country)

Kinds of tariffs

It may be classified on the basis of 1. Purpose

Revenue tariffs : The aim is to increase the revenue and not to restrict the entry/ inflow of goods. Very low rates. (b) Protective tariffs : The aim is to protect the domestic industry and are levied at very high rates, hence obstruct the inflow of goods. Anti dumping duties / Countervailing Duties ( LG Semicon & Hyundai Electronics Micron Technologies ) Counteracting duties ( subsidy)
(a)

2. Computation
(a) Specific tariffs are on the basis of per unit of any characteristics. (b) Ad valorem tariffs are charged as specific Percentage on the value of goods. (c) Compounded tariffs are charged as specific Percentage on the value of goods and per unit of any characteristics.

EFFECTS OF TARIFFS
1. 2.

GAINS TO Govt. Domestic Producers

1. 2.

Revenues Protects as Cost of Imported Goods is increased

1.

LOSS TO Consumers

1.

Pay extra price for the product

Conclusions

Tariffs are pro producers & Anti Consumers. ( Import of Foodstuffs , Cosmetics in Japan ) Tariffs reduce the overall efficiency of World Economy .( Rice in Korea )

NON TARIFF BARRIERS

1.Import Quotas (a) Absolute Quota: Under it the maximum quantity of different commodities which would be imported is fixed in advance. These quotas are often combined with licensing system to regulate and allocate between various importers. Under it a license / permit is to be obtained from the govt. to import the goods specifying the qty. and country before entering into a contract with supply.

(b) Tariff Rate Quota It is a hybrid of Quota and Tariff A lower rate is applied within and higher for extra. (c) Unilateral Quota A Country fixes a maximum ceiling. (d) Bilateral Quota Wherein a country has a negotiation on export & import.

2.Licensing

Under this licensing system a company has to obtain license before entering into a contract for EXIM. In some countries it is the most powerful tools used for policy making.

3. Voluntary Export Restraint

It is a quota on trade imposed by exporting country typically at the request of government of importing country. Fear of punitive tariffs. MFA-Multi Fibre Agreement Quota Rent: the extra profit that producers make when supply is artificially limited by an import quota.

3.Local Contract Requirement

It is a requirement that some specific fraction of a good be produced domestically. The requirement can be expressed in physical terms or value terms.( Little known law in US the Buy America Act.)

4.Administrative Policies/ Protection

Administrative Trade Policies are bureaucratic rules which are designed to make it difficult for imports to enter its country. Japanese are the masters of this kind of trade barriers followed by France.

5.Embargo

It refers to a complete ban on trade( E&I) in one or more products with a particular country. Ex Beef in India & USA with Cuba.

7.Product & Testing Standards

This reqires that foreign goods must meet a countrys domestic product or testing standards. Ex China requires extensive and expensive testing of foreign goods.

8 Environmental Protection Laws

The growing concern for environmental protection has led to this form of NTB.

Protectionism

Political Arguments
1. 2. 3. 4. 5.

National Security Retaliation Protecting jobs Protecting Human rights Protecting Consumers

Protectionism

Economic Arguments
1. 2.

Infant Industry Strategic Trade Policy

Issues in Doha Round

Antidumping Actions Between Jan 1995 & Dec.2002 Cases registered 2160 India 331 EU 261 US 292

Basic metals, Chemical, Plastic, Machinery & Electrical appliances

Protectionism in Agriculture

Tariffs

Agriculture Non Agriculture

Canada EU Japan US

22.9 17.3 18.2 11

4.4 4.5 4.0 4.7

Protectionism in Agriculture

Subsidies in Agriculture

Canada EU Japan US

20 49 64 24

The combination of high tariffs barriers and significant subsidies introduces significant distortions . Net effects Consumers have to pay extra price. Reduce the volume of int. trade Overproduction of subsidized goods.

TRIM

TRIM: Trade Related Investment Measures are rules that apply to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. A....TRIM is/are rules, which restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets. Example: Export Prohibited items from India: Gold, animals, natural resources (some kind of trees) etc.

TRIP

TRIP: Trade Related Aspects of Intellectual Property Rights is an agreement that sets down minimum standards for many forms of intellectual property regulation. Specifically, contains requirements that nations law must meet for: copyright rights, patents; trademarks and undisclosed of confidential information.

Intellectual Property Rights

TRIPScame into existence after Uruguay round. Grant and enforce :Patents 20 Years Copyrights 50 Years The basis of this agreement was the protection Of Intellectual Property rights of the trading nations.

Patents and Copyrights

International Trade is Effected in 2 ways

1 Reducing Export opportunities to that nation. 2.Reducing Export opportunities to third nation Example Pharmaceutical Industry ( Product & Process)