Non Tariff Barriers

NON TARIFF BARRIERS What are non tariff barriers? Non- tariff barriers are broadly defined as any impediment to trade other than tariffs. Non tariff barriers can be classified into two groups; Direct and Indirect. (a)Direct Barriers are barriers that specifically limit import of goods or services. Eg: Embargoes and quotas EMBARGOES: Embargoes are the most restrictive of the direct non tariff barriers. They are either a complete ban on trade with a foreign nation or a ban on sales or transfer of specific products. Eg: The U. S. has imposed embargoes on Afghanistan, Cuba, Iraq and Iran. QUOTAS: Quotas are a quantitative restriction on imports. They are based on either value of goods or on quantity. They can be placed on all goods of a particular kind coming from all countries, a group of countries or only one country. (b) Indirect Barriers are laws, administrative regulations, industrial/commercial practices and even social and cultural forces that either limit or discourage sale or purchase of foreign goods or services in a domestic market. To restrict imports, countries may impose monetary or exchange controls on currencies. Foreign governments can impose technical barriers to trade, for example, performance standards for products, product specifications or products safety. Eg: Japan has governmental restrictions on the use of food preservatives. It is a trade barrier in disguise, because foods without preservatives cannot be transported long distance. Import Licensing Schemes and Customs Procedures Some governments require importers to apply for permission to import products, subjecting them to complex and discriminatory requirements. It is often expensive and time-consuming. Let us look at some tariff measures that are maintained against Indian exports: 1)Country- The United States of America Product- Marine Products Non tariff barrier- Increased in-detailed inspections under the Bio-Terrorism Act. -Customs Bond requirement -Mandatory labeling discriminating ‘farm-raised’ & ‘wild’. -Punitive fines in case of non-compliance -Non-recognition of EIC certification 2)Country- Columbia Product- Pharmaceuticals Non tariff barrier – Registration by Columbian Drug Control and Certification takes 11-12 months and is very tedious. Inspections are undertaken for environmental compliance and punitive fines are levied in case of non-compliance 3)Country- Bangladesh Product- Poultry products Non tariff barrier- Bangladesh continues to ban imports of poultry products despite India gaining the ‘Avian influenza free’ status. )Country- Chile Product- Wheat, wheat flour, sugar Non tariff barrier- Complex price band system -A minimum import price (well above international and domestic prices) is stipulated. The Argentinean Customs can ask for validation of Indian Customs Invoice and a full set of original documents if they suspect that the invoiced value is less than the minimum import price established. 5)Country- China Service- Banking Non tariff barrier- China maintains a number of regulatory barriers which make investment in the banking sector very difficult. While foreign banks are allowed to open branches, regulatory treatment remains discriminatory. Branches of foreign banks are for example subject to higher capital norms than Chinese banks, which moreover are coupled with the number of their offices. Costs for establishing bank branches in China are therefore very high and foreign banks market share in China remains marginal REFERENCES International Business Law and its Environment- Richard Schaffer, Filiberto Augusti & Beverly Carle International Business- Francis Cherunilam