tariff and ntb

7/30/2019 Tariff and NTB

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TARIFF AND NON-TARIFF

BARRIERS

Presented by:

Sakshi Kothari(11214)

Parth Trivedi(11241)Priyank Bothra(11249)

Brinda Jadeja(11257)


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PROTECTIONISM

One of the most important features of theinternational trading environment is theproliferation of the trade barriers

Even though the process of eliminationof the tariff barriers has continued, sincearound the mid 1970s the liberalizationtrend in the developed countries has

been replaced by a growingprotectionism

The exports of developing countrieshave been hit much more than those of

the developed ones by protectionism


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PROTECTIONISM (CONTINUE)

A number of problems like thecurrency crisis, oil crisis, debt crisis,

recession, high unemployment and

trade deficits produced an atmospherein which demands for protection

increased dramatically

As a response to this, the developedcountries have increased the non-tariff

barriers (NTBs)


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Reasons forPROTECTIONISM

1. To protect domestic industries fromforeign competition

2. To promote indigenous research and

development

3. To conserve the foreign exchange

resources of the country

4. To make the balance of paymentsposition favourable


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Arguments for Protection

Infant IndustryArgument

DiversificationArgument

Improving the Termsof Trade

lmproving Balance ofPayments

Anti-Dumping Bargaining

EmploymentArgument

National Defence

Key IndustryArgument

The Pauper LabourArgument

Equalisation of Costsof Production

Strategic Trade

Policy


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Demerits of Protection

1. Protection is against the interest ofconsumers as it increases price andreduces variety and choice.

2. Protection makes producers and sellersless quality conscious.

3. It encourages domestic monopolies.

4. Even inefficient firms may feel secure underprotection and it discourages innovation.

5. Protection leaves the arena open tocorruption.

6. It reduces the volume of foreign trade.

7. Protection leads to uneconomic utilization ofworld's resources.


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Trade Policy-Introduction

International Trade policies deals withthe policies of the national governmentsrelating to exports of various goods andservices in various countries either onequal terms and conditions or ondiscriminatory terms and conditions.

Trade policies also aim at protecting the

domestic industry from the competition ofthe advanced countries throughimposing quotas and build competenciesby providing subsidies.


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Instruments of Trade Policy:

Broadly classified into:

Tariff

Non-tariff


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Tariff Barriers

What are tariff barriers?

Tariff designed to make imports more

expensive to protect the domestic

industry. What is the purpose of tariffs?

To protect the domestic industry by increasing the

cost of imported goods.

EXAMPLE: Government of India imposed tariffsto protect domestic automobiles industry, sugar

industry, cement industry and steel industry.


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Types of Tariff:

On the Basis of Purpose:

Revenue Tariff:

To provide state with the revenue.

Levied on luxury goods. Protective Tariff:

To maintain and encourage those branches of

home industry protected by the duties.


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Types of Tariff(contd..):

On the Basis of Origin and Destination:Ad Valorem Duty:

Levied as the percentage of the total value of the

imported common duty.

Specific Duty: Levied per physical unit of the imported

commodity.

Compound Duty:

Levied a percentage ad valorem duty plus a

specific duty on each unit of the commodity.

Eg. 1 lac + 10% of the price.


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Types of Tariff(contd..):

Single Column Tariff:A uniform rate of duty is imposed on all

similar commodities irrespective of thecountry from which they are imposed.

Double Column Tariff: Two different rates of duty have been

imposed.

Triple Column Tariff: Two or more tariff rates levied on each

category of commodity.


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Who Gain from Tariff?

Government of the importing countryearns in the form of the revenue.

Industries of the importing country

would find market for their products asthe imported goods will be expensive.

Jobs in the domestic markets are

saved. Business for the ancillary industry,

servicing, market intermediation etc. is

also protected.


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Who are Adversely Affected?

Consumers

Industries of the exporting country.


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Other Impacts of Tariff

Barriers: Tariff Barriers tend to Increase:

Inflationarypressures.

Special interests privileges.

Government control and political consideration ineconomic matters.

Tariff Barriers tend to Weaken: Balance-of-payments positions.

Supply-and-demand patterns.

International relations.

Tariff barrier tend to restrict: Manufacturers supply sources.

Choices available to consumers.

Competition.


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Non-Tariff Barriers:

Non-Tariff measures include allmeasures, other than tariffs, the effect

of which is to restrict imports, or to

significantly distort trade.


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New Zealand'sapples account fora third of itsagricultural

exports but havebeen banned fromAustralia since1921 due to fearsabout the spread

of fire blight, acrop pest. By Doug Latimer in Sydney

Published: 1:00AM BST 13 Apr

2010

Apples Banned - Non Tariff

Barrier


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McDonald France Big Beef

McDonalds France in 1998, ran a

print ad campaign featuring

overweight cowboys complaining

about the fact that McDonald's

France refuses to buy American

beef but uses only French, to

"guarantee maximum hygienic

conditions" an unsubtle effort

to identify the Global Arches withEuropean efforts to block the

import of hormone-laced

American beef. (Karon, 2002)


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Types of Non-Tariff Barriers:

Specific Limitations on Trade: Import licensing requirements

Quotas

Proportion restrictions of foreign to domesticgoods

Minimum import price limits

Embargoes

Customs and Administrative EntryProcedures: Valuation systems

Anti-dumping practices


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Types of Non-Tariff

Barriers(contd.): Government Participation in Trade:

Export subsidies

Countervailing duties

Changes in Imports:

Prior import deposit subsidies

Administrative fees Special supplementary duties


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Types of Non-Tariff

Barriers(contd.): Standards:

Standard disparities

Intergovernmental acceptances of testing

methods and standards Packaging , labeling and marking

Others:

Voluntary export restraints Monetary barriers


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Impact of Non-Tariff Barriers:

Have emerged as potent Protectionisttool.

It being less transparent, its difficult to

identify and quantify its impact. It is pointed out that Indian, exports of

iron and steel, chemicals, textiles,vegetables and allied categories find

market access very difficult in thedeveloped world, essentially by theimposition of a variety of NTB


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Transition from Tariffs to Non-

Tariffs Barriers: Developed countries can have

sources of income other than tariffs.

These tariffs can be used to support

weak industries or compensation ofindustries, which have been affectednegatively by the reduction of tariffs.

Ability of interest groups to influence

the process in the absence ofopportunities to obtain governmentsupport for the tariffs.


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Difference between Tariff and

Non-Tariff Barriers: The purpose of both tariff and non tariff

barriers is same that is to impose restrictionon import but they differ in approach andmanner.

Tariff barriers ensure revenue for agovernment but non tariff barriers do notbring any revenue. Import Licenses andImport quotas are some of the non tariff

barriers. Non tariff barriers are country specific and

often based upon flimsy grounds that canserve to sour relations between countrieswhereas tariff barriers are more transparentin nature.


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