Non Tariff Barrier.doc

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CHAPTER NO.1

INTRODUCTION

Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in

the usual form of a tariff. Some common examples of NTB's are anti-dumping

measures and countervailing duties, which, although they are called "non-tariff"

barriers, have the effect of tariffs once they are enacted.

Their use has risen sharply after the WTO rules led to a very significant reduction in

tariff use. Some non-tariff trade barriers are expressly permitted in very limited

circumstances, when they are deemed necessary to protect health, safety, or

sanitation, or to protect depletable natural resources. In other forms, they are criticized

as a means to evade free trade rules such as those of the World Trade Organization

(WTO), the European Union (EU), or North American Free Trade Agreement

(NAFTA) that restrict the use of tariffs.

Some of non-tariff barriers are not directly related to foreign economic regulations,

but nevertheless they have a significant impact on foreign-economic activity and

foreign trade between countries.

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Trade between countries is referred to trade in goods, services and factors of

production. Non-tariff barriers to trade include import quotas, special licenses,

unreasonable standards for the quality of goods, bureaucratic delays at customs,

export restrictions, limiting the activities of state trading, export subsidies,

countervailing duties, technical barriers to trade, sanitary and phyto-sanitary

measures, rules of origin, etc. Sometimes in this list they include macroeconomic

measures affecting trade.

Six Types of Non-Tariff Barriers to Trade

Specific Limitations on Trade:

Quotas

Import Licensing requirements

Proportion restrictions of foreign to domestic goods (local content requirements)

Minimum import price limits

Embargoes

Customs and Administrative Entry Procedures:

Valuation systems

Anti-dumping practices

Tariff classifications

Documentation requirements

Fees

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Standards:

Standard disparities

Intergovernmental acceptances of testing methods and standards

Packaging, labeling, and marking

Government Participation in Trade:

Government procurement policies

Export subsidies

Countervailing duties

Domestic assistance programs

Charges on imports:

Prior import deposit subsidies

Administrative fees

Special supplementary duties

Import credit discrimination

Variable levies

Border taxes

Others:

Voluntary export restraints

Orderly marketing agreements

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CHAPTER NO.2

TYPES OF 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. We choose traditional classification of non-tariff barriers, according to

which they are divided into 3 principal categories.

The first category includes methods to directly import restrictions for protection of

certain sectors of national industries: licensing and allocation of import quotas,

antidumping and countervailing duties, import deposits, so-called voluntary export

restraints, countervailing duties, the system of minimum import prices, etc.

Under second category follow methods that are not directly aimed at restricting

foreign trade and more related to the administrative bureaucracy, whose actions,

however, restrict trade, for example: customs procedures, technical standards and

norms, sanitary and veterinary standards, requirements for labeling and packaging,

bottling, etc.

The third category consists of methods that are not directly aimed at restricting the

import or promoting the export, but the effects of which often lead to this result.

The non-tariff barriers can include wide variety of restrictions to trade. Here are some

example of the popular NTBs.

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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). One-time license indicates a quantity of goods, its cost, its country

of origin (or destination), and in some cases also customs point through which import

(or export) of goods should be carried out..

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.

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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.

Given the firm commitment made by the Member Countries on the programme of

tariff reduction under the CEPT Scheme, attention has now shifted to non-tariff

barriers. Now Article 5 of the CEPT Agreement calls on Member States to "eliminate

other non-tariff barriers on a gradual basis within a period of five years after the

enjoyment of concessions". Member Countries are working to develop detained work

programmes on eliminating NTBs for endorsement by the ASEAN Economic

Ministers Meeting scheduled in September 1995. Currently, the Preparatory work for

NTB elimination is being undertaken by the Interim Technical Working Group

(ITWG) on CEPT for AFTA, which reports directly to the ASEAN Senior Economic

Officials.

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Significant progress has already been made in identifying those NTBs that affect

intra-regional trade the most. The identification process involved a number of

important steps. First, a working definition of NTBs had to be agreed upon. This

working definition (see Table 3) adopted by the ITWG was based on a classification

developed by the United Nations Conference on Trade and Development (UNCTAD).

Second, it was decided to focus on those NTBs that affect the most widely-traded

Products in the region. These products are those in chapters 27 (minerals), 84

(electrical appliances) and 85 (machinery) of the Harmonised System classification.

In 1994, these products made up nearly 55% of Indonesia's imports; over 64% of

Malaysia's imports; over 50% of the Philippines' imports; and nearly 70% of

Thailand's imports.

Major NTB's Identified

Based on these various information sources, the following measures have been

identified as major NTBs affecting intra-regional trade: customs surcharges, technical

measures and product characteristic requirements, and monopolistic measures. Table

4 gives us an indication of the most widespread NTBs in ASEAN. Customs

surcharges are applied to about 2.683 tariff lines. Technical measures and product

characteristic requirements come in second involving more than 975 tariff lines.

Finally we have monopolistic measures involving state-trading or the use of a selected

or limited group of importers.

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CHAPTER NO.3

WORKING DEFINITION OF NON-TARIFF MEASURES

FOR PURPOSES OF IMPLEMENTING THE CEPT AGREEMENT

This section presents working definitions for the trade control measures adopted by

the Interim Technical Working Group on CEPT for AFTA. These measures are

classified under broad categories according to their nature. Within the broad

categories, the measures are further subdivided according to their characteristics.

Special mention should be made of the measures for sensitive product categories and

technical regulations, which are subdivided according to their corresponding

objectives, i.e. for the protection of human health, animal health and life, plan health,

the environment and wildlife, to control drug abuse, to ensure human safety and to

ensure national security.

PARA-TARIFF MEASURES

Other measures that increase the cost of imports in a manner similar to tariff

measures, i.e. by a fixed percentage or by a fixed amount, calculated respectively on

the basis of the value and the quantity, are known as para-tariff measures. Four groups

are distinguished: customs surcharges; additional charges; internal taxes and charges

levied on imports; and decreed customs valuation.

Customs surcharges/import surcharges

The customs surcharge, also called surtax or additional duty, is an ad hoc trade policy

instrument to raise fiscal revenue or to protect domestic industry.

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Additional charges

Additional charges, which are levied on imported goods in addition to customs duties

and surcharges and which have no internal equivalent, comprise various taxes and

fees. The category of additional charges includes the tax on foreign exchange

transactions, stamp tax, airport license fee, consular invoice fee, statistical tax, tax on

transport facilities and charges for sensitive product categories. Various other taxes.

such as the export promotion fund tax, taxes for the special funds, the municipal tax,

registration fee on imported motor vehicles, customs formality tax, etc., are classified

as additional charges, n.e.s. It should be noted that Article VIII of GATT states that

fees and charges other than customs duties and internal taxes shall be limited in

amount to the approximate cost of services rendered and shall not represent an

indirect protection to domestic products or a taxation of imports or exports for fiscal

purposes.

Decreed customs valuation

Customs duties and other charges on selected airports can be levied on the basis of a

decreed value of goods (the so called "valeur mercuriale" in French). This practice is

presented as a means to avoid fraud or to protect domestic industry. The decreed

value de facto transforms an ad valorem duty into a specific duty.

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PRICE CONTROL MEASURES

Measures intended to control the prices of imported articles for the following reasons

(i) to sustain domestic prices of certain products when the import price is inferior to

the sustained price;

(ii) to establish the domestic price of certain products because of price fluctuation in

the domestic market or price instability in the foreign market; and

(iii) to counteract the damage caused by the application of unfair practices of foreign

trade.

Most of these measures affect the cost of airports in a variable amount calculated on

the basis of the existing difference between two prices of the same product. compared

for control purposes. The measures initially adopted can be administrative fixing of

prices and voluntary restriction of the minimum price level of exports or investigation

of prices, to subsequently arrive at one of the following adjustment mechanisms;

suspension of airport licenses; application of variable charges, anti-dumping measures

or countervailing duties.

Administrative price fixing of import prices

By administrative price fixing, the authorities of the importing country take into

account the domestic prices of the producer or consumer establish floor and ceiling

price limits; or revert to determined international market values. Various terms are

used, depending on the country or sector, to denominate the different administrative

price fixing methods, such as official prices, minimum import prices or basic import

prices.

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Voluntary export price restraint

A restraint arrangement in which the exporter agrees to keep the price of his goods

above a certain level.

Variable charges

Variable charges bring the market prices of imported agricultural and food products

close to those of corresponding domestic products, in advance, for a given period of

time, and for a pre-established price. These prices, are known as reference prices,

threshold prices or trigger prices. Primary commodities may be charged per total

weight, while charges on processed foodstuffs can be levied in proportion to the

primary product contents in the final product. In the case of the EU, the charges

applied to primary products as such are called variable levies and those as part of a

processed product, variable components.

FINANCE MEASURES

Measures that regulate the access to and cost of foreign exchange for imports and

define the terms of payment. They may increase the airport cost in a fashion similar to

tariff measures.

Advance payment requirements

Advance payment of the value of the import transaction an /or related imported taxes,

which is required at the moment of the application for, or the issuance of, the import

license.

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Advance import deposits

Obligation to deposit a percentage of the value of the import transaction for a given

time period in advance of the imports, with no allowance for interest to be accrued on

the deposit.

Cash margin requirement

Obligation to deposit the total amount corresponding to the transaction value, or a

specified part of it, in a commercial bank, before the opening of a letter of credit;

payment be required in foreign currency.

Advance payment of customs duties

Advance payment of the totally or a part of customs duties, with no allowance for

interest to be accrued.

Refundable deposits for sensitive product categories

The deposit refunds are charges which are refunded when the used products or its

containers are returned to a collection system.

Regulations concerning terms of payment for imports

Special regulations regarding the terms of payment of imports and the obtaining and

use of credit (foreign or domestic) to finance imports.

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Transfer delays, queuing

Minimum permitted delays between the date of delivery of goods and that of final

settlement of the import transaction (usually 90, 180 or 360 days for consumer goods

and industrial inputs and two to five years for capital goods). Queuing takes place

when the prescribed delays cannot be observed because of foreign exchange shortage,

and transactions are settled successively after a longer waiting period.

MONOPOLISTIC MEASURES

Measures which create a monopolistic situation., by giving exclusive rights to one or

a limited group of economic operators. for earlier social, fiscal or economic reasons.

Single channel for imports

All imports or imports of selected commodities have to be channeled through state-

owned agencies or state-controlled enterprises. Sometimes the private sector may also

be granted exclusive import rights.

Compulsory national services

Government-sanctioned exclusive rights of national insurance and shipping

companies on all or a specified share of imports.

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TECHNICAL MEASURES

Measures referring to product characteristics such as quality, safety or dimensions,

including the applicable administrative provisions, terminology symbols, testing and

test methods, packaging, marking and labeling requirements as they apply to a

product. The implementation of these measures by sensitive product categories can

result in the application of one of the measures listed under codes ending in 71 to 79.

Technical regulations

Regulations that provide technical requirements, either directly or by referring to or

incorporating the content of a standard, technical specification or code of practice, in

order to protect human life or health or to protect animal life or health (sanitary

regulation); to protect plant health (phyto sanitary regulation); to protect the

environment and to protect wildlife; to ensure human safety; to ensure national

security; to prevent deceptive practices.

The regulation may be supplemented by technical guidance that outlines some means

of compliance with the requirements of the regulation, including administrative

provisions for customs clearance, such as prior registration of the importer or

obligation to present a certificate issued by relevant governmental services in the

country of origin of the goods. In certain cases, a prior recognition of the exporter or

certificate issuing service by the importing country is also required.

Product characteristics requirements

Technical specifications prescribing technical requirements to be fulfilled by a

product.

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Marking requirements

Measures defining the information for transport and customs, that the packaging of

goods should carry (country of origin, weight, special symbols for dangerous

substances, etc.)

Labeling requirements

Measures regulating the kind and size of printing on packages and labels and defining

the information that may or should be provided to the consumer.

Packaging requirements

Measures regulating the mode in which goods must be or cannot be packed, in

conformity with the importing country handling equipment or for other reasons, and

defining the packaging materials to be used.

Testing, inspection and quarantine requirements

Compulsory testing of product samples by a designated laboratory in the importing

country, inspection of goods by health authorities prior to release from customs or a

quarantine requirement in respect of live animals and plants.

Pre-shipment inspection

Compulsory quality, quantity and price control of goods prior to shipment from the

exporting country, affected by an inspecting agency mandated by the authorities of

the importing country. Price control is intended to avoid under invoicing and over

invoicing, so that customs duties are not evaded or foreign exchange is not being

drained.

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Special customs formalities

Formalities which are not clearly related to the administration of any measure applied

by the given importing country such as the obligation to submit more detailed product

information than normally required on the basis of a customs declaration, the

requirement to use specific points of entry, etc.

MOST PREVALENT NTBs, BY NUMBER OF TARIFF LINES

(Preliminary)

Non-tariff Barrier Number of Tariff Line Affected

Customs surcharges 2,683

Additional Charges 126

Single Channel for Imports 65

State-trading Administration 10

Technical Measures 568

Product Characteristic Requirement 407

Marketing Requirements 3

Technical Regulations 3

Modality for Eliminating NTBs

Since the measures that act as NTBs tend to vary greatly in their nature, NTB-

elimination will mean a different thing depending on the measure concerned. In the

case of surcharges this might mean something as simple as doing away with these

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surcharges. On the other hand, technical regulations cannot be done away with

because there are valid reasons for maintaining them, such as public safety,

environmental concern, or health reasons. In which case, the elimination of these

measures as NTBs might mean harmonizing product standards or developing mutual

recognition of standards across Member Countries. The idea is to limit the trade-

hampering effects of technical regulations or measures. In the case of monopolistic

measures or state monopoly, the process of NTB elimination might mean creating a

window for competition and market access by other ASEAN Member Countries.

General Features of the Process for Eliminating NTBs

There has already been an agreement on the general features of the process for

eliminating NTBs in ASEAN. The process Involves

(a) Verification of information on NTBs,

(b) prioritization of products/NTBs,

(c) Developing specific work programmes, and

(d) Obtaining a mandate from the ASEAN Economic Ministers to implement the

work programmes.

Member Countries are now in the process of verifying the list of NTBs and products

covered by these measures compiled by the ASEAN Secretariat. Several criteria have

already been considered by the Interim Technical Working Group on CEPT for AFTA

(ITWG) to identify which products/measures have to be dealt with first. These criteria

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can be used singly or in combination with each other to set priorities. These criteria

are in order of importance:

(a) Number of private sector complaints,

(b) Difference between domestic and world prices, and

(c) Trade value.

The first criterion would rely on the private sector's or exporters' complaints.

Presumably, they are in a better position to tell how different measures existing in the

country of destination acts as a trade barrier. The second criterion is the price

divergence between domestic and world prices. The price wedge gives an indication

of how much trade is hindered since if there are no trade barriers presumably

importation would tend to wipe out this price difference. The difficulty with this

criterion is that it is difficult to find the price data to make this sort of comparison.

Finally, the trade value criterion would priorities those NTBs/products which is traded

most widely (both within and outside the region).

The advantage of this criterion is that the ASEAN Secretariat already has this

information. The disadvantage of this criterion is that it does not tell us whether the

NTB present in the sector hampers trade or not. The fact that there is extensive trade

in this product may indicate that the NTB is not an important hindrance to trade.

As pointed out above, these criteria are not mutually exclusive. They can be used

jointly, and in fact, where all three criteria converge, they should give a robust

indicator of the degree to which NTBs exist in that product or sector.

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Other ASEAN-wide Activities bearing on NTBs

Although, the work on NTB elimination is now currently centered in the Interim

Technical Working Group on CEPT for AFTA (ITWG), it is recognized that expertise

from different ASEAN bodies will have to be tapped for carrying out this work

eventually. One of these bodies is the ASEAN Consultative Committee for Standards

and Quality (ACCSQ) which has already set up a Task Force to deal with NTB

elimination. Under the Senior Officials of the ASEAN Ministers of Agriculture and

Forestry (SOM AMAF) is a Working Group on SPS measures which have come up

with action plans on NTB elimination in the areas of crops, livestock and fisheries.

The action plans involve compiling information on technical measures in ASEAN

countries covering agricultural products, and looking into how greater transparency,

mutual recognition and harmonization of SPS standards can further liberalize intra-

ASEAN trade in agricultural products.

Decision of the Seventh AFTA Council

The Seventh AFTA Council has tasked these Working Groups to finalize their Action

Plans by November 1995 providing a detailed timetable of all their activities.

CHAPTER NO.4

BEWARE OF NON-TARIFF BARRIERS IN GLOBAL MARKETS

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The traditional and non-traditional media love to talk about the love-hate relationship

between China and the United States of America. Viewed from the eyes of the global

automobile industry, China looks like a picture of paradise. Production, sales and

profits are rising, and the forecast is that China will continue to demonstrate strong

growth in the years to come. However, as sales explode new draft regulations by the

Peoples Republic of China are already making the multinational automakers lose their

sleep.

A new government policy paper for this industry in China includes plans to restrict

the number of ports where foreign-made cars can be imported. Multinational car

makers fear that the clause demanding separate sales outlets for imported and

Chinese-made cars will make it much more expensive to introduce new brands. As the

locals build their distribution networks for China-made cars, foreign companies had

hoped that they would also be the backbone for distributing imports. These hopes are

beginning to shatter.

This article is not about the automobile industry nor is it about China; it is about non-

tariff barriers (NTB) in the world markets. In this article I will identify some of the

NTBs that are likely to exist in most countries, even though the nature and extent of

such barriers varies from country to country. Some barriers are easy to deal with

while others may prove to be insurmountable.

Regulatory Roadblocks

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To achieve their respective fiscal and monetary objectives, governments often provide

trade consultations and administrative guidance to business. In some countries the

government provides guidance, coordination and arbitration acting, in effect, as a

caretaker, coordinator and leader for businesses. Tactics used by governments to

achieve their national goals include licensing, foreign exchange allocations, quotas,

local content requirements, minimum import price limitations and embargos. The

protection of local industry is facilitated through government procurement policies,

export subsidies, countervailing duties and domestic assistance programs.

Many countries use import licensing schemes to implement a wide variety of

regulations relating to national security, protection of health, safety, the environment,

morality, religion, intellectual property and compliance with international obligations.

The most common justification given for this practice is to enable the country to

speed up the development of new industries by the use of protective measures at early

stages of development.

For example, Sanitary and Phyto-Sanitary measures are one form of the non-tariff

international trade barrier that has been developed to protect the consumer against

unsafe products and deceptive marketing practices. Product related requirements

include, but are not limited to, detailed labeling requirements with extensive product

content description. Such labeling requirements become a hindrance especially when

the product is being exported to different countries each with dissimilar regulations.

STRATEGIC AND OPERATIONAL ROADBLOCKS

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Lack of access to the latest manufacturing technologies, territorial restrictions to

trade, collusion among competing firms, and close ties between transacting partners

often conspire to restrict the timely availability of component parts and raw material

blocking access to efficient distribution channels. Access to a countrys distribution or

commercial infrastructure is, at times, impossible because of the close ties between

local manufacturers, wholesalers and retailers.

Customs and Market Entry Practices

Every nation has its customs and entry procedures. In many countries existing border

procedures are unnecessarily cumbersome. Voluminous and complicated document

requirements and excessive delays in customs clearance due to human and technical

factors serve as non-tariff barriers. For many companies, requirements to provide the

same documentation to numerous agencies in one country significantly contribute to

the costs.

Technical Barriers

Technical barriers to trade (TBT) refer to technical regulations and voluntary

standards that set out specific characteristics of a product, such as its size, shape,

design, functions and performance, or the way a product is labelled or packaged

before it enters the marketplace. Included in this set of measures are also the technical

procedures that confirm that products fulfill the requirements laid down in regulations

and standards.

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Product specifications are often written in such detail that a fair chance of winning a

contract might mandate extensive product modification. The product testing process

might take several months to several years. Such tactics become market entry barriers

especially when they are not required of domestic firms.

Competitive Barriers

Competition among several differentiated brands is a natural barrier in the market

since it allows a strong brand name company to charge a premium price and capture a

large share of a profitable market segment. If competition from a well known global

or local brand is intense, novice international marketers with quality products need to

make a heavy investment in marketing communication and brand building.

Financial Infrastructure Barriers

Many countries require prior import deposits or charge prohibitive administrative fees

and higher taxes for foreign companies. Multiple exchange rates are also used to

encourage trading on some product categories while discouraging import or export of

others. Many governments around the globe have developed opaque financial systems

where it is hard to know where the state ends and the corporation begins.

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Physical Infrastructure Barriers

Local administrative bodies and physical infrastructure built to protect local interests

pose difficulties for road transportation, private and commercial trucking, and inter-

provincial or interstate purchasing and distribution. Conditions of roads, harbors,

airports and telecommunication limit the market potential and results in market

barriers. For example, road construction in Thailand has not kept up with traffic

growth. In this country, as well as many of its neighboring countries, cars and trucks

must compete with bicycles and motorcycles for space in the movement of people and

products.

Socio-Cultural and Ethical Norms and Practices

International marketers must be aware of the socio-cultural practices since it adds to

the cost of doing business while challenging the ethical values and legal responsibility

of the exporter. Smuggling, counterfeiting and bribery are more prevalent in some

countries and regions than others. These practices create barriers to market access.

You may refer to my article on counterfeit goods for its impact on marketers of

genuine products. Bribes take many forms ranging from money, to favors, to trips to

other countries.

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CHAPTER NO. 5

EXAMPLES OF NON-TARIFF BARRIERS FROM ACROSS THE GLOBE

The office of the Unites States Trade Representatives (USTR) publishes the national

Trade Estimate Report on global foreign trade barriers (FTB) every year. Most

countries around the world, including the United Stated and Europe, have multiple

non-tariff barriers according to the USTR report on FTB. Examples provided below

are but a sampling of non-tariff barriers:

Angola

Angola is officially open to foreign investment, but its regulatory and legal

infrastructure is inadequate to facilitate direct investment and provide sufficient

protection

Argentina

Since 2002 Argentina has prohibited the import of beef and beef products from the

United States due to concerns about what is commonly referred to as Mad Cow

Disease. Argentina also banned the import of chicken products from the United

States.

Australia

The government of Australia maintains restrictions and prohibitions on some

agricultural imports through quarantine and health restrictions. These include

restriction on chicken, pork, California table grapes, Florida citrus, stone fruit, apples

and corn.

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Canada

Canada prohibits import of fresh or processed foods and vegetables in packages

exceeding certain standard package sizes unless the Government of Canada grants a

ministerial easement or exemption.

China

China's current banking, finance, insurance and taxation structures are bureaucratic

and cumbersome. The goal of any supply chain or logistics manager is to create a

seamless flow of product going one way and payment going the other way. Regional

fragmentation of finance regulation, tax laws and other institutions has the same effect

on the payment side of the supply chain as regional protectionism has on the transport

and distribution side. For instance, a company with joint ventures in several locations

supplied by one supplier may have to make a separate payment from each venture to

the supplier.

Egypt

Egypt continues to block imports of U.S. turkey and chicken parts based on reported

concerns that the U.S. industry cannot verify it meets Egyptian Halal requirements.

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European Union (EU)

The EU has adopted a series of directives that establish essential requirements for a

whole variety of equipment including telecommunications equipment. Equipment

must be labeled with the CE mark to indicate that it has complied with all relevant

directives. Other countries including U.S. and Japan have their own standards for

telecommunications and equipment. The purpose of such regulations include

electrical safety, electromagnetic compatibility, user safety and quality of

communications.

Japan

Access to Japans value chain network creates market barriers since there are tight

corporate and cultural ties among original Equipment manufacturers (OEM),

wholesaler and retailers. Keiretsu are large groups of Japanese companies linked

together often through one main affiliated bank.

Malaysia

Malaysias import-licensing system, according to critics, inflates the price of imported

vehicles and benefits a few privileged license holders. Under the system, licensees are

granted so-called Approved Permits (AP), which every car manufactured or

assembled outside the country must secure before it can be imported and sold locally.

The Ministry of International Trade and Industry issues APs to companies controlled

by ethnic Malay investors and endorsed by the ministry as qualified importers. No

open bidding is involved in the process, and the APs are awarded at no cost to the

recipient. Similar systems also prevail in other industries.

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Thailand

In Thailand, farmers complain they can't compete with the low-cost Chinese onions

and garlic flooding into the country. And Thai exporters grumble that China uses non-

tariff barriers such as long delays in customs clearance to keep out perishable Thai

tropical fruit such as mangoes and papayas, which rot before they reach their

destination due to delays in customs clearance.

United States

Industrial alcohol made in Canada and shipped to the U.S. must be tested at a U.S.

facility before it can be sold because the U.S. doesn't recognize Canadian test

standards for the product. Without the testing, the exporter would pay an excise tax.

Regulatory Recourse

The World Trade Organization (WTO) Agreement on non-tariff barriers to trade

contains rules specifically aimed at preventing these measures from becoming

unnecessary barriers. But making a rule is not sufficient to eliminate non-tariff

barriers.

In the past decades opening markets was relatively simple. Measuring the tariffs and

judging whether or not they were too high allowed negotiating international

agreements to reduce them if they were deemed too high. The General Agreement on

Trade and Tariffs (GATT), predecessor to WTO, was quite successful at lowering the

tariffs on manufactured goods. In the new world order and global market

environment, no independent multinational trade organization including WTO is set

up to deal with this new form of protectionism we refer to as non-tariff barriers.

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CHAPTER NO.6

PRACTICAL RECOMMENDATIONS FOR GLOBAL MARKETERS

Develop a thorough understanding of the nature and intensity of non-tariff barriers to

determine how you can best leverage the market opportunity by knocking down some

of the roadblocks. Form strategic alliances with local businesses to gain access to the

distribution channels. Explore the possibility of forming alliances with the

governments in countries where government actively participates in business.

Reexamine the value chain and determine if some of the integrated activities in your

value chain must be broken down and outsourced to the local businesses. Price your

products strategically and base the same on customers ability and willingness to pay.

Help develop the legal and physical infrastructure; become a change agent by acting

as a good corporate citizen in every society in which you do business.

Final Words

It is important to strategically develop a continuous environment monitoring the

process to assess market opportunities around the world. This process must include

assessment of social, economic, ecological, technological and political; legal and

regulatory (STEEP) factors. This monitoring process must include a detailed analysis

of the non-tariff barriers discussed in this article.

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PROTECTIONISM IN THE LESS-DEVELOPED COUNTRIES

Much of the industrialization that took place in the late 20th century in some less-

developed countries was characterized by the expansion of import-competing

industries protected by high tariff walls. In many of those countries, tariffs and

various quantitative restrictions on manufactured goods were high, but the effective

rates of protection were often even higher, because the goods tended to be highly

fabricated and the proportion of value added in production after importation was low.

While countries such as Taiwan, Hong Kong, and South Korea oriented their

manufacturing industries mainly toward export trade, they tended to be exceptional

cases. More commonly, developing nations have mistakenly sought to compete with

foreign-made goods for the domestic market. High protection in these countries has

often contributed to a slowdown in production, while the export of primary

commodities has discouraged expansion of exports of the more valuable

manufactured goods. Although domestic production of nondurable consumer goods

fosters rapid economic growth at an early stage, less-developed countries have

encountered considerable difficulties in producing more-sophisticated, value-added

commodities. They suffer all the disadvantages of small domestic markets, in addition

to a lack of incentives for technological improvement.

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CONCLUSION

Non-tariff barriers have effects similar to those of tariffs: they increase domestic

prices and impede trade to protect selected producers at the expense of domestic

consumers. As shown in the case studies of sugar and automobiles, they also have

other effects, generally adverse.

Despite the adverse national consequences, the use of non-tariff barriers has increased

sharply in recent years. The chances for a reversal of this trend appear to be small.

The variety of non-tariff measures, the difficulties of identifying and measuring their

effects and the benefits received by specific groups combine to make a significant

reduction of non-tariff barriers in the ongoing Uruguay Round negotiations unlikely.

The original mission of GAn, which has been largely achieved, was to reduce tariffs.

The question, however, of why policymakers have preferred to use non-tariff barriers

rather than tariffs in recent years remains. The more certain protective effects of non-

tariff bat-riders is one plausible explanation. A second explanation, which focuses on

the distribution of the benefits, is that the benefits of non-tariff barriers can be

captured by foreign producers and domestic politicians. Such an allocation of benefits

increases the probability that the political process generates larger amounts of non-

tariff barriers relative to tariffs. A final explanation is that their adverse effects are

generally less obvious to consumers than the effects of tariffs.

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BIBLIOGRAPHY

Mehta, Rajesh (2006), Non Trade Barriers Affecting Indias Exports

Dhar, Biswajit and Kallummal, Murali (2007), Non Trade Barriers in Doha Round-

Is a Solution In Sight?

WEBBLIOGRAPHY

www.google.com

www.wikipedia.com

www.investopedia.com
http://www.google.com/http://www.wikipedia.com/http://www.investopedia.com/http://www.google.com/http://www.wikipedia.com/http://www.investopedia.com/

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