International Trade Barriers

Trade Barriers
In reality, a country rarely follows free trade. Countries employ a variety of tools for limiting free trade.

Trade Barriers 1
Government imposed To protect domestic industries from foreign competition To conserve foreign exchange reserves of the country To make balance of payments position favourable To promote indigenous R&D To curb conspicuous consumption To discriminate against certain countries Implemented through
Tariff barriers Non-tariff barriers

Tariff Barriers
Taxes on goods moving across a economic or political boundary India had one of the highest tariff walls in the world (300% in 1991 to 50% in 1995) Main goal of GATT to reduce tariff barriers to promote free trade.

Tariff Barriers- Types

Import duty
imposed on goods being brought into the country

Export duty
levied on goods being taken out of the country

Transit duty
imposed on goods passing through the country

Bases of Tariff
Specific duty
a flat duty based on number of units regardless of value of the goods

Ad valorem duty
a percentage of the value of the good

Compound duty
A combination of specific and ad valorem duty

Export Duty
Generally levied by raw-material-producing countries rather than by advanced industrial countries Conservation of natural resources

Export Duty 1
Coffee Tea Basmati Rice Raw Cotton As prescribed by EXIM policy Rs 2200 per quintal Rs 5 per kg Rs 12000 per tonne Rs 10000 per tonne

Countervailing Duties
Anti-subsidy duty If a country pays any subsidy (directly or indirectly) to its exporters for exporting goods to India, Central Government can impose Countervailing duty up to the amount of such subsidy Budget, 2012 digicam, camcorder 2% countervailing duty

Anti-dumping Duty
Levied when an exporter ships a product at prices lower than those prevailing at home and in turn causes disruption in the destination country

Non-tariff Barriers (NTB)

All rules, regulations and bureaucratic delays that help in keeping foreign goods out of the domestic markets.

Types of NTB
Import Quota
a limit on number of units that can be imported

Import Licensing Foreign exchange regulations Canalization of import/export

State Trading

Embargo
imports from particular country totally banned

Subsidies
Governments directly/indirectly subsidize local production to make it more competitive in domestic/foreign markets

Types of NTB 1
Local Content Requirement Technical Barriers
Testing, certification of products for health, welfare and safety reasons

International Price Fixing

Cartel, OPEC

Restrictions on Foreign Investment Customs Procedures Consular Formalities Voluntary Export Restraint (VER) Multifibere Arrangement (MFA) Quantitative Restrictions (QR)

 Anti dumping and countervailing measures McDonald France (1998) refuses to buy American beef but uses only French to guarantee maximum hygienic conditions New Zealands apple account for 1/3rd of its agricultural exports - banned in Australia since 1921 fears about the spread of fire blight, a crop pest

Examples of NTB
France - Sony radio and walkman, Japan Japan Ski equipment , Sweden Southern Europe Pineapple, Ghana India Perrier Mineral Water, France (till 2004)

Voluntary Export Restraint (VER)

A government imposed limit on the quantity of goods that can be exported out of another country during a specified period of time Japanese car export to the US in 1980s

Multifibere Arrangement (MFA)

Imposing quotas on the amount of textiles developing countries could export to developed countries. It expired on 1 January 2005