Tariff and Non

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INDEX

I. Introduction

II. Tariffs and Non tariff barriers

III. Types of tariff barriers

IV. Non tariff Trade Barriers

V. The transition from tariff to non tariff barriers

VI. The impact of tariff and non-tariff barriers on

access to essential drugs for the poorest

people

VII. List of Questions arised..

a) Why are tariff and trade barriers used?

b) Who Benefits ?

c) How do tariff affect prices ?

VIII. Tariff and Modern Trade and the bottom line

IX. Issues In WTO

X. The precautionary principle and sanitary and

phytosanitary barriers to tradeXI. Measures supported global health council

XII. Conclusion

XIII.References/Bibliography


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Introduction

International trade increases the number of goods that

domestic consumers can choose from, decreases the costof those goods through increased competition, and allows

domestic industries to ship their products abroad. While all

of these seem beneficial, free trade isn't widely accepted

as completely beneficial to all parties

TARIFFS AND NON-TARIFFS BARRIER

In simplest terms, atariffis a tax. It adds to the cost of

imported goods and is one of several trade policies that a

country can enact. Tariff is a custom duty or a tax on

products that move across borders. The most important of

tariff barrier is the custom duty imposed by the importing

country. A tax may also be imposed by the exporting

country on its exports. However, governments rarelyimpose tariff on exports,because,countries want to sell as

much as possible to other countries.

Trade barriers are government-inducedrestrictions on international trade.[1] The barriers can takemany forms, including the following:

Tariffs Non-tariff barriers to trade

o Import licenseso Export licenseso Import quotas
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o Subsidieso Voluntary Export Restraintso Local content requirementso

Embargoo Currency devaluation[2]o Trade restriction

Most trade barriers work on the same principle: theimposition of some sort ofcost on trade that raises theprice of the traded products. If two or more nationsrepeatedly use trade barriers against each other, then a

trade warresults.

[edit] Examples of free trade areas

North American Free Trade Agreement (NAFTA) South Asia Free Trade Agreement (SAFTA) European Free Trade Association European Union (EU) Union of South American Nations New West Partnership (An internal free-trade zone in

Canada between Alberta, British Columbia, andSaskatchewan)

Gulf Cooperation Council common market
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Conlusion

Economists generally agree that trade barriers are

detrimental and decrease overall economic efficiency, thiscan be explained by the theory of comparative advantage.In theory, free trade involves the removal of all suchbarriers, except perhaps those considered necessary forhealth or national security. In practice, however, eventhose countries promoting free trade heavily subsidizecertain industries, such as agriculture and steel.

Trade barriers are often criticized for the effect they haveon the developing world. Because rich-country players callmost of the shots and set trade policies, goods such ascrops that developing countries are best at producing stillface high barriers. Trade barriers such as taxes on food
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imports or subsidies for farmers in developed economieslead to overproduction and dumping on world markets,thus lowering prices and hurting poor-country farmers.

Tariffs also tend to be anti-poor, with low rates for rawcommodities and high rates for labor-intensive processedgoods. The Commitment to Development Index measuresthe effect that rich country trade policies actually have onthe developing world.

Another negative aspect of trade barriers is that it wouldcause a limited choice of products and would therefore

force customers to pay higher prices and accept inferiorquality.

Trade Negotiations

Since 1947, the General Agreement on Tariffs and Trade

(GATT) and subsequent World Trade Organization (WTO)accords have facilitated the negotiation of lower tariff rates

among 6 member countries. In addition, bilateral agree-

ments, such as the Israel-U.S. free trade agree ment

(FTA), regional trade agreements, and other trade

agreements between groups of countries have resulted in

drug tariff reductions. Multilateral work continues on tariff

reductions in the Doha Round, the ongoing WTOnegotiations on new trade rules and implementation of the

2001 Doha Development Agenda rules. Current

negotiations are stalled, primarily because developed
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countries are reluctant to relinquish agricultural subsidies

and developing countries are unwilling to reduce general

import tariffs. The stalled negotiations have delayed

additional pharmaceutical tariff reductions. Public healthand access to pharmaceuticals have achieved a special

place in trade negotiations as codified in GATT 1947

Article XX(b), the Pharmaceutical Tariff Elimination

Agreement, and the Doha Declaration. Therefore, the

public health community has a key role to play in

maintaining and advancing pharmaceutical tradenegotiation.

TYPES OF TARIFF BARRIERS

Specific duty

Ad valorem duty

Sliding scale duty

Combined and compound duty

Countervailing duty

Revenue Tariff

Anti-Dumping duty

Protective tariff

Specific TariffsA fixed fee levied on one unit of an imported good isreferred to as a specific tariff. This tariff can vary accordingto the type of good imported. For example, a country could


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levy a $15 tariff on each pair of shoes imported, but levy a$300 tariff on each computer imported.

Ad Valorem Tariffs

The phrase ad valorem is Latin for "according to value",

and this type of tariff is levied on a good based on a

percentage of that good's value. An example of an ad

valorem tariff would be a 15% tariff levied by Japan on

U.S. automobiles. The 15% is a price increase on the

value of the automobile, so a $10,000 vehicle now costs

$11,500 to Japanese consumers. This price increaseprotects domestic producers from being undercut, but also

keeps prices artificially high for Japanese car shoppers.

Combined and compound duty

It is the combination of specific duty and ad valorem dutyon a single product. For instance, there can be a

combined duty when 10% of value and Rs. 1 on every

meter of cloth is cahrged as duty

Thus, in this case, both duties are charged together.

Sliding scale duty

The import duties which vary with the prices ofcommodities are called sliding scale duties. Historically,

these duties are confined to agricultural products, as their


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prices are frequently vary, mostly due to natural factors.

These are also called as seasonal duties.

Countervailing Duty

It is imposed on certain imports where products are

subsidised by exporting governments. As a result of

government subsidy, imports become more cheaper than

domestic goods. To nullify the effect of subsidy, this duty

is imposed in addition to normal duties.

Revenue Tariff

A tariff which is designed to provide revenue to the home

government is called revenue tariff. Generally, a tariff is

imposed with a view of earning revenue by imposed duty

on consumer goods, particularly, on a luxury goods whose

demand for rich is inelastic.

Anti-Dumping Duty

At times, exporters attempt to capture foreign markets by

selling goods at rock-bottom prices , such practice are

called dumping. As a result of dumping, domestic

industries find it difficult to compete with imported goods.To offset anti dumping effects, duties are levied in

additional to normal duties.


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Protective Tariff

In order to protect domestic industries from stiff

competition of imported goods, protective tariff on levied

on imports. Normally, a very high duties imposed, so as to

discourage imports or to make the import more expensive

as that of domestic product.

Non-tariff barriers to trade (NTBs) aretrade barriersthat

restrictimportsbut are not in the usual form of atariff.Some common examples of NTB's are anti-dumping

measures andcountervailing duties, which, although they

are called "non-tariff" barriers, have the effect of tariffs

once they are enacted

Non-Tariff Trade Barriers

Countries use many mechanisms to restrict imports. Acritical objective of the Uruguay Round of GATTnegotiations, shared by the U.S., was theelimination of non-tariff barriers to trade inagricultural commodities (including quotas) and,where necessary, to replace them with tariffs aprocess called tarrification. Tarrification of

agricultural commodities was largely achieved andviewed as a major success of the 1994 GATTagreement. Thus, if the U.S. honors its GATTcommitments, the utilization of new non-tariff barriersto trade is not really an option for the 2002 Farm Bill.
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Domestic Content Requirements

Governments have used domestic content

regulations to restrict imports. The intent is usually tostimulate the development of domestic industries.Domestic content regulations typically specify thepercentage of a products total value that must beproduced domestically in order for the product to besold in the domestic market (Carbaugh). Severaldeveloping countries have imposed domestic contentrequirements to foster agricultural, automobile, and

textile production. They are normally used inconjunction with a policy of import substitution inwhich domestic production replaces imports.Domestic content requirements have not been asprevalent in agriculture as in some other industries,such as automobiles, but some agricultural examplesillustrate their effects. Australia used domestic

content requirements to support leaf tobaccoproduction. In order to pay a relatively low import

Issues duty on imported tobacco, Australian cigarettemanufacturers were required to use 57 percent domesticleaf tobacco. Member countries of trade agreements alsouse domestic content rules to ensure that nonmembers donot manipulate the agreements to circumvent tariffs. For

example, North American Free Trade Agreement (NAFTA)rules of origin provisions stipulate that all single-strengthcitrus juice must be made from 100 percent NAFTA originfresh citrus fruit.

Again, as is the case with other trade barriers, it


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seems unlikely that introducing domestic contentrules to enhance domestic demand for U.S.agricultural commodities is a viable option for the

2002 Farm Bill.

Import Licenses

Import licenses have proved to be effectivemechanisms for restricting imports. Under an import-licensing scheme, importers of a commodity arerequired to obtain a license for each shipment they

bring into the country. Without explicitly utilizing aquota mechanism, a country can simply restrictimports on any basis it chooses through its allocationof import licenses. Prior to the implementation ofNAFTA, for example, Mexico required that wheatand other agricultural commodity imports be permittedonly under license. Elimination of import licenses for

agricultural commodities was a critical objective ofthe Uruguay Round of GATT negotiations and thusthe use of this mechanism to protect U.S. agriculturalproducers is unlikely an option for the 2002 FarmBill.

Import State Trading Enterprises

Import State Trading Enterprises (STEs) are

government owned or sanctioned agencies that act aspartial or pure single buyer importers of a commodityor set of commodities in world markets. They alsooften enjoy a partial or pure domestic monopoly overthe sale of those commodities. Current important


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examples of import STEs in world agriculturalcommodity markets include the Japanese Food

Agency (barley, rice, and wheat), South Koreas

Livestock Products Marketing Organization, andChinas National Cereals, Oil and Foodstuffs Importand Export Commission (COFCO).STEs can restrict imports in several ways. First,they can impose a set of implicit import tariffs bypurchasing imports at world prices and offering themfor sale at much higher domestic prices. Thedifference between the purchase price and the

domestic sales price simply represents a hidden tariff.Import STEs may also implement implicit general andtargeted import quotas, or utilize complex and costlyimplicit import rules that make importing into themarket unprofitable.Recently, in a submission to the current WTOnegotiations, the United States targeted the trade

restricting operations of import and export STEs as aprimary concern. A major problem with import STEsis that it is quite difficult to estimate the impacts oftheir operations on trade, because those operationslack transparency. STEs often refuse to provide theinformation needed to make such assessments,claiming that such disclosure is not required becausethey are quasi-private companies. In spite of thesedifficulties, the challenges provided by STEs willalmost certainly continue to be addressed throughbilateral and multilateral trade negotiations rather thanin the context of domestic legislation through the 2002Farm Bill.


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Technical Barriers to Trade

All countries impose technical rules aboutpackaging, product definitions, labeling, etc. In thecontext of international trade, such rules may also beused as non-tariff trade barriers. For example,imagine if Korea were to require that oranges sold inthe country be less than two inches in diameter.Oranges grown in Korea happen to be much smallerthan Navel oranges grown in California, so this type

of technical rule would effectively ban the sales ofCalifornia oranges and protect the market for Koreanoranges. Such rules violate WTO provisions thatrequire countries to treat imports and domesticproducts equivalently and not to advantage productsfrom one source over another, even in indirect ways.

Again, however, these issues will likely be dealt with

through bilateral and multilateral trade negotiations ratherthan through domestic Farm Bill policyinitiatives.

Exchange Rate Management Policies

Some countries may restrict agricultural importsthrough managing their exchange rates. To somedegree, countries can and have used exchange ratepolicies to discourage imports and encourage exportsof all commodities. The exchange rate between twocountries currencies is simply the price at which onecurrency trades for the other. For example, if one


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U.S. dollar can be used to purchase 100 Japaneseyen (and vice versa), the exchange rate between theU.S. dollar and the Japanese yen is 100 yen per

dollar. If the yen depreciates in value relative to theU.S. dollar, then a dollar is able to purchase moreyen. A 10 percent depreciation or devaluation of theyen, for example, would mean that the price of oneU.S. dollar increased to 110 yen.One effect of currency depreciation is to make allimports more expensive in the country itself. If, forexample, the yen depreciates by 10 percent from an

initial value of 100 yen per dollar, and the price of aton of U.S. beef on world markets is $2,000, then theprice of that ton of beef in Japan would increase from200,000 yen to 220,000 yen. A policy thatdeliberately lowers the exchange rate of a countryscurrency will, therefore, inhibit imports of agriculturalcommodities, as well as imports of all other

commodities. Thus, countries that pursue deliberatepolicies of undervaluing their currency in internationalfinancial markets are not usually targeting agriculturalimports.Some countries have targeted specific types ofimports through implementing multiple exchange ratepolicy under which importers were required to paydifferent exchange rates for foreign currencydepending on the commodities they were importing.The objectives of such programs have been to reducebalance of payments problems and to raise revenuesfor the government. Multiple exchange rateprograms were rare in the 1990s, and generally have


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not been utilized by developed economies.Finally, exchange rate policies are usually notsector-specific. In the United States, they are clearly

under the preview of the Federal Reserve Board and,as such, will not likely be a major issue for the 2002Farm Bill. There have been many calls in recentcongressional testimony, however, to offset thenegative impacts caused by a strengthening US dollarwith counter-cyclical payments to export dependentagricultural products.

Voluntary Export Restraints (VER)

This type of trade barrier is "voluntary" in that it iscreated by the exporting country rather than theimporting one. A voluntary export restraint is usuallylevied at the behest of the importing country, and couldbe accompanied by a reciprocal VER. For example,Brazil could place a VER on the exportation of sugar toCanada, based on a request by Canada. Canada couldthen place a VER on the exportation of coal to Brazil.This increases the price of both coal and sugar, butprotects the domestic industries.

Local Content Requirement

Instead of placing a quota on the number of goods thatcan be imported, the government can require that acertain percentage of a good be made domestically. The
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restriction can be a percentage of the good itself, or apercentage of the value of the good. For example, arestriction on the import of computers might say that 25%

of the pieces used to make the computer are madedomestically, or can say that 15% of the value of the goodmust come from domestically produced components.

Embargo

Embargo is a specific type of quotas prohibiting the trade.

As well as quotas, embargoes may be imposed on importsor exports of particular goods, regardless of destination, inrespect of certain goods supplied to specific countries, orin respect of all goods shipped to certain countries.

Although the embargo is usually introduced for politicalpurposes, the consequences, in essence, could beeconomic

Administrative and bureaucratic delays at theentrance

Among the methods of non-tariff regulation should bementioned administrative and bureaucratic delays at theentrance which increase uncertainty and the cost ofmaintaining inventory

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 selldomestic products, but also to block sales of products of


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foreign manufacture. These standards are sometimesentered under the pretext of protecting the safety andhealth of local populations

Non-tariff barriers today

With the exception of export subsidies and quotas, NTBsare most similar to the tariffs. Tariffs for goods productionwere reduced during the eight rounds of negotiations inthe WTO and the General Agreement on Tariffs and Trade(GATT). After lowering of tariffs, the principle of

protectionism demanded the introduction of new NTBssuch as technical barriers to trade (TBT). According tostatements made at United Nations Conference on Tradeand Development (UNCTAD, 2005), the use of NTBs,based on the amount and control of price levels hasdecreased significantly from 45% in 1994 to 15% in 2004,while use of other NTBs increased from 55% in 1994 to85% in 2004.

Increasing consumer demand for safe and environmentfriendly products also have had their impact on increasingpopularity of TBT. Many NTBs are governed by WTOagreements, which originated in the Uruguay Round (theTBT Agreement, SPS Measures Agreement, the

Agreement on Textiles and Clothing), as well as GATT

articles. NTBs in the field of services have become asimportant as in the field of usual trade.

Most of the NTB can be defined as protectionistmeasures, unless they are related to difficulties in themarket, such as externalities and information asymmetries


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information asymmetries between consumers andproducers of goods. An example of this is safety standardsand labeling requirements.

The need to protect sensitive to import industries, as wellas a wide range of trade restrictions, available to thegovernments of industrialized countries, forcing them toresort to use the NTB, and putting serious obstacles tointernational trade and world economic growth. Thus,NTBs can be referred as a new of protection which hasreplaced tariffs as an old form of protection

The EU and Agricultural Trade Barriers

Common Agricultural Policy (CAP)Guaranteed minimum prices Import tariffs and quotas on products outside EU

Conflict between US and EUSubsidies resulting from political/economic reasonsrather than real demand from producers

Safety Barriers

European-style autos becoming popular

Popular European vehicles not legal in USDifferences in US and European safety regulations

inhibiting trade


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Piracy as a Barrier on Global Trade

Effects are more pronounced in developing economies.Data is limited, but scopeof products is broad andexpanding

Industry Sectors Subject to Infringement:

- Apparel - Electrical Components- Audio-visual - Personal accessories- Automotive - Pharmaceuticals

- Consumer Electronics

The IMF and Trade Barriers

Controversial monetary aid programStructural adjustment programRemoval of all internal subsidiesJamaican milk subsidies

The transition from tariffs to non-tariff barriers

One of the reasons why industrialized countries havemoved from tariffs to NTBs is the fact that developedcountries have sources of income other than tariffs.Historically, in the formation of nation-states, governmentshad to get funding. They received it through the

introduction of tariffs. This explains the fact that mostdeveloping countries still rely on tariffs as a way to financetheir spending. Developed countries can afford not todepend on tariffs, at the same time developing NTBs as apossible way of international trade regulation. The second


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reason for the transition to NTBs is that these tariffs canbe used to support weak industries or compensation ofindustries, which have been affected negatively by the

reduction of tariffs. The third reason for the popularity ofNTBs is the ability of interest groups to influence theprocess in the absence of opportunities to obtaingovernment support for the tariffs.

The ImpacT of TarIff aNd NoN-TarIff BarrIers oNaccess To esseNTIal drugs for The pooresT peopleDespite an enormous global supply of pharmaceuticals,

regular access to medicines has not been realized inmuch of the world. Drugs are widely available in only 28

percent of countries, with 1 many factors, including

pharmaceutical costs, affecting access. On a national

health system level, pharmaceutical costs are the largest


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health expenditure after staffing. For individuals in

developing countries, the price of essential medicines may

be burdensome; these costs are usually borne by families.

Most developing countries are net importers ofpharmaceutical products and many impose tariffs and

non-tariff barriers (NTBs) on finished drugs, active

pharmaceutical ingredients (APIs), and excipients (inactive

substances that contain the active ingredients). Tariffs and

NTBs contribute to pharmaceutical costs by increasing the

final price of essential drugs, limiting access for thepoorest people. Although some developing countries (e.g.,

China, India and Brazil) have established pharmaceutical

industries, they continue to import some products. This

policy brief describes tariffs and NTBs and the relationship

between these trade-related barriers and access to

essential drugs. It explores current efforts to reduce these

barriers and proposes policy and advocacyrecommendations.

Why Are Tariffs and Trade Barriers Used?

Tariffs are often created to protectinfant industriesand

developing economies, but are also used by more

advanced economies with developed industries. Here are

five of the top reasons tariffs are used:

1. Protecting Domestic EmploymentThe levying of tariffs is often highly politicized. The
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possibility of increased competition from importedgoods can threaten domestic industries. Thesedomestic companies may fire workers or shift

production abroad to cut costs, which means higherunemploymentand a less happy electorate. Theunemployment argument often shifts to domesticindustries complaining about cheap foreign labor, andhow poor working conditions and lack of regulationallow foreign companies to produce goods morecheaply. In economics, however, countries willcontinue to produce goods until they no longer have a

comparative advantage(not to be confused with anabsolute advantage).

2. Protecting ConsumersA government may levy a tariff on products that itfeels could endanger its population. For example,South Korea may place a tariff on imported beef fromthe United States if it thinks that the goods could betainted with disease.

3. Infant IndustriesThe use of tariffs to protect infant industries can beseen by the Import Substitution Industrialization (ISI)strategy employed by many developing nations. Thegovernment of a developing economy will levy tariffs

on imported goods in industries in which it wants tofoster growth. This increases the prices of importedgoods and creates a domestic market for domesticallyproduced goods, while protecting those industriesfrom being forced out by more competitive pricing. Itdecreases unemployment and allows developing
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countries to shift from agricultural products to finishedgoods.Criticisms of this sort ofprotectioniststrategy revolve

around the cost ofsubsidizingthe development ofinfant industries. If an industry develops withoutcompetition, it could wind up producing lower qualitygoods, and the subsidies required to keep the state-backed industry afloat could sap economic growth.

4. National SecurityBarriersare also employed by developed countries to

protect certain industries that are deemedstrategically important, such as those supportingnational security. Defense industries are often viewedas vital to state interests, and often enjoy significantlevels of protection. For example, while both WesternEurope and the United States are industrialized, bothare very protective of defense-oriented companies.

5. RetaliationCountries may also set tariffs as a retaliationtechnique if they think that a trading partner has notplayed by the rules. For example, if France believesthat the United States has allowed its wine producersto call its domestically produced sparkling wines"Champagne" (a name specific to the Champagne

region of France) for too long, it may levy a tariff onimported meat from the United States. If the U.S.agrees to crack down on the improper labeling,France is likely to stop its retaliation. Retaliation canalso be employed if a trading partner goes against thegovernment's foreign policy objectives.
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Types of Tariffs and Trade BarriersThere are several types of tariffs and barriers that agovernment can employ:

Specific tariffs Ad valorem tariffs Licenses Import quotas Voluntary export restraints Local content requirements

Who Benefits?The benefits of tariffs are uneven. Because a tariff is atax, the government will see increased revenue asimports enter the domestic market. Domestic industriesalso benefit from a reduction in competition, sinceimport prices are artificially inflated. Unfortunately forconsumers - both individual consumers and businesses

- higher import prices mean higher prices for goods. Ifthe price of steel is inflated due to tariffs, individualconsumers pay more for products using steel, andbusinesses pay more for steel that they use to makegoods. In short, tariffs and trade barriers tend to be pro-producer and anti-consumer.

The effect of tariffs and trade barriers on businesses,consumers and the government shifts over time. In theshort run, higher prices for goods can reduceconsumption by individual consumers and bybusinesses. During this time period, businesses will
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profit and the government will see an increase inrevenue from duties. In the long term, businesses maysee a decline in efficiency due to a lack of competition,

and may also see a reduction in profits due to theemergence ofsubstitutes for their products. For thegovernment, the long-term effect of subsidies is anincrease in the demand for public services, sinceincreased prices, especially in foodstuffs, leave lessdisposable income. (For related reading, check out InPraise Of Trade Deficits.)

How Do Tariffs Affect Prices?Tariffs increase the prices of imported goods. Because ofthis, domestic producers are not forced to reduce theirprices from increased competition, and domesticconsumers are left paying higher prices as a result. Tariffsalso reduce efficiencies by allowing companies that would

not exist in a more competitive market to remain open.

Figure 1 illustrates the effects of world trade without thepresence of a tariff. In the graph, DS means domesticsupply and DD means domestic demand. The price ofgoods at home is found at price P, while the world price isfound at P*. At a lower price, domestic consumers will

consume Qw worth of goods, but because the homecountrycan only produce up to Qd, it must import Qw-Qdworth of goods.
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Figure 1. Price without the

influence of a tariff

When a tariff or other price-increasing policy is put inplace, the effect is to increase prices and limit the volumeof imports. In Figure 2, price increases from the non-tariffP* to P'. Because price has increased, more domesticcompanies are willing to produce the good, so Qd moves

right. This also shifts Qw left. The overall effect is areduction in imports, increased domestic production andhigher consumer prices. (To learn more about themovement of equilibrium due to changes in supply anddemand, read Understanding Supply-Side Economics.)
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Figure 2. Price under theeffects of a tariff

Tariffs and Modern Trade

The role tariffs play in international trade has declined in

modern times. One of the primary reasons for the declineis the introduction of international organizations designed

to improve free trade, such as the World Trade

Organization (WTO). Such organizations make it more

difficult for a country to levy tariffs and taxes on imported

goods, and can reduce the likelihood of retaliatory taxes.

Because of this, countries have shifted to non-tariff

barriers, such as quotas and export restraints.

Organizations like the WTO attempt to reduce production

and consumption distortions created by tariffs. These

distortions are the result of domestic producers making
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goods due to inflated prices, and consumers purchasing

fewer goods because prices have increased. (To learn

about the WTO's efforts, read What Is The World Trade

Organization?)

Since the 1930s, many developed countries have reduced

tariffs and trade barriers, which has improved global

integration and brought about globalization. Multilateral

agreements between governments increase the likelihood

of tariff reduction, while enforcement on bindingagreements reduces uncertainty.

The Bottom Line

Free trade benefits consumers through increased choice

and reduced prices, but because the global economy

brings with it uncertainty, many governments impose

tariffs and other trade barriers to protect industry. There isa delicate balance between the pursuit of efficiencies and

the government's need to ensure low unemployment.

ISSUE

In the Uruguay round of the GATT/WTOnegotiations,

members agreed to drop the use of import quotas andother non-tariff barriers in favor of tariff-rate quotas.

Countries also agreed to gradually lower each tariff rate

and raise the quantity to which the low tariff applied.

Thus, over time, trade would be taxed at a lower rate and
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trade flows would increase.Given current U.S.

commitments under the WTO on market access, options

are limited for U.S. policy innovations in the 2002 Farm Bill

vis a vis tariffs on agricultural imports from other countries.Providing higher prices to domestic producers by

increasing tariffs on agricultural imports is not permitted.

In addition, particularly because the U.S. is a net exporter

of many agricultural commodities,successive U.S.

governments have generally taken a strong position within

the WTO that tariff and TRQ barriers need to be reduced.

The Precautionary Principle and Sanitary andPhytosanitary Barriers to Trade

The precautionary principle, or foresight planning,has recently been frequently proposed as a

justification for government restrictions on trade in thecontext of environmental and health concerns, oftenregardless of cost or scientific evidence. It was firstproposed as a household management technique inthe 1930s in Germany, and included elements ofprevention, cost effectiveness, and ethicalresponsibility to maintain natural systems (ORiordanand Cameron). In the context of managingenvironmental uncertainty, the principle enjoyed aresurgence of popularity during a meeting of the U.N.World Charter for Nature (of which the U.S. is onlyan observer) in 1982. Its use was re-endorsed by theU.N. Convention on Bio-diversity in 1992, and again


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in Montreal, Canada in January 2000.The precautionary principle has been interpretedby some to mean that new chemicals and

technologies should be considered dangerous untilproven otherwise. It therefore requires thoseresponsible for an activity or process to establish itsharmlessness and to be liable if damage occurs.Most recent attempts to invoke the principle havecited the use of toxic substances, exploitation ofnatural resources, and environmental degradation.Concerns about species extinction, high rates of

birth defects, learning deficiencies, cancer, climatechange, ozone depletion, and contamination with toxicchemicals and nuclear materials have also been usedto justify trade and other government restrictions onthe basis of the precautionary principle. Thus,countries seeking more open trading regimes havebeen concerned that the precautionary principle will

simply be used to justify nontariff trade barriers. Forexample, rigid adherence to the precautionaryprinciple could lead to trade embargoes on productssuch as genetically modified oil seeds with little ornoreliance on scientific analysis to justify marketclosure.Sometimes, restrictions on imports from certainplaces are fully consistent with protecting consumers,the environment, or agriculture from harmful diseasesor pests that may accompany the imported product.The WTO Sanitary and Phytosanitary (SPS)provisions on technical trade rules specificallyrecognize that all countries feel a responsibility to


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secure their borders against the importation of unsafeproducts. Prior to 1994, however, such barriers wereoften simply used as excuses to keep out a product

for which there was no real evidence of any problem.These phony technical barriers were just an excuse tokeep out competitive products. The current WTOagreement requires that whenever a technical barrieris challenged, a member country must show that thebarrier has solid scientific justification and restrictstrade as little as possible to achieve its scientificobjectives. This requirement has resulted in a number

of barriers being relaxed around the world.It should be emphasized that WTO rules do notrequire member countries to harmonize rules or adoptinternational standards only that there must besome scientific basis for the rules that are adopted.Thus, any options for sanitary and phytosanitaryinitiatives considered in the 2002 Farm Bill must be

based on sound science and they do not have to beharmonized with the initiatives of other countries.

The global health council supports the following

measures

The potential benefits to minimizing tariffs and ensur-

Supporting the minimization of tariffs on essential ing that

trade measures are not barriers to essential drugs and

medical products for the poor, particularly in drug access

outweigh negative consequences that may multilateral,

regional and national forums; arise, including short-term


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revenue loss to the importing country. These efforts can

contribute to a healthier Supporting the development of

databases on NTBs population by increasing access to

essential drugs and and tool kits on waivers andexemptions that will facili- other medical technologies. tate

efforts by organizations attempting to import drugs and

medical technologies of public health significance;

Coherence between trade and health policy will be

essential to accomplish the goal of minimizing tariffs

Highlighting and analyzing non-tariff barriers to and NTBs.Collaboration between the public health, essential drug

access: trade and advocacy communities can be helpful in

Providing input to the GNTB and the U.S. reducing tariffs

and NTBs, and aligning trade and National Trade Estimate

Report on Foreign Trade 22 health policy goals. The

Global Health Council recom- Barriers, published annually;

mends focusing on issues of mutual interest: Advocatingfor the harmonization and transparency of drug

regulations; Collecting information on waivers and

exemptions Protecting the publics health by ensuring

that and their application so that program managers have

local standards are in compliance with international this

tool at their disposal norms.


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REFERENCE / BIBLIOGRAPHY

http://www.Investopedia.com (US, A Division of

ValueClick, Inc.)http://www.infoplease.com/cig/economics/barriers-

international-trade.html

A project made by Alphonso thomas regarding non tariif

barriers

http://www.globalhealth.organisation regarding policybrief

Major part from project made by Daniel A Summer and

his team of Texas University.

Carbaugh, Robert J. International Economics, South-

Western, 1995.

Cross, Frank B. Paradoxical Perils of thePrecautionary

Principle, Revision 851,

Washington and Lee Home Page, Volume 53:3 1996.

New Principle to Protect Human Health and the

Environment, Health Alert, Earth Guardian, CQS, 1999.

http:// http://en.wikipedia.org/wiki/Main_Page
http://www.infoplease.com/cig/economics/barriers-international-trade.htmlhttp://www.infoplease.com/cig/economics/barriers-international-trade.htmlhttp://www.infoplease.com/cig/economics/barriers-international-trade.htmlhttp://www.globalhealth.organisation/http://en.wikipedia.org/wiki/Main_Pagehttp://en.wikipedia.org/wiki/Main_Pagehttp://www.globalhealth.organisation/http://www.infoplease.com/cig/economics/barriers-international-trade.htmlhttp://www.infoplease.com/cig/economics/barriers-international-trade.html


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ANALYSIS

OF

TARIFFAND

NON-TARIFF

BARRIERS


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ECONOMICS PROJECT

WORK

ANALYSIS OF TARIFF

&

NON TARIFFBARRIERS

Mahesh MohantyM.com - 1

65


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ACKNOWLEDGEMENT

First of all, I would like to send my sincere

thanks to Mr. Amrish Dubey for his helpful

hand in the completion of my project and I

would also like to take an opportunity to thank

my brother and my friends who helped me in

collecting necessary information and making of

the report. I am grateful to all of them for their

time, energy and wisdom.

Getting a project ready requires the work and

effort of many people. I would like all those who

have contributed in completing this project.

Mahesh Mohanty


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DECLARATION

I Mahesh Chandra Mohanty, Class M.com I of

Lords College, Mumbai hereby declare that the

project entitled International Tariff and Non-Tariff

Barriers is an original work and the same has not

been submitted to any other institutions for the

award of any other degree. The feasible suggestion

has been duly incorporated in consultation with the

supervisior

Mahesh Mohanty


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Tariff and Non

Documents

Transcript of Tariff and Non