Page 107 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

Unit 8 : Tariff, Quotas and Non-tariff Barriers : Definitions and Types

for the admission of investments and investors. It is determined by mode (fair and equitable, national, Notes
most-favored-nation), order of nationalization and compensation, transfer profits and capital
repatriation and dispute resolution.
Foreign exchange restrictions and foreign exchange controls
Foreign exchange restrictions and foreign exchange controls occupy a special place among the non-
tariff regulatory instruments of foreign economic activity. Foreign exchange restrictions constitute
the regulation of transactions of residents and nonresidents with currency and other currency values.
Also an important part of the mechanism of control of foreign economic activity is the establishment
of the national currency against foreign currencies.
The Transition from Tariffs to Non-tariff Barriers

One of the reasons why industrialized countries have moved from tariffs to NTBs is the fact that
developed countries have sources of income other than tariffs. Historically, in the formation of nation-
states, governments had to get funding. They received it through the introduction of tariffs. This
explains the fact that most developing countries still rely on tariffs as a way to finance their spending.
Developed countries can afford not to depend on tariffs, at the same time developing NTBs as a
possible way of international trade regulation. The second reason for the transition to NTBs is that
these tariffs can be used to support weak industries or compensation of industries, which have been
affected negatively by the reduction of tariffs. The third reason for the popularity of NTBs is the
ability of interest groups to influence the process in the absence of opportunities to obtain government
support for the tariffs.
Non-tariff barriers today
With the exception of export subsidies and quotas, NTBs are most similar to the tariffs. Tariffs for
goods production were reduced during the eight rounds of negotiations in the WTO and the General
Agreement on Tariffs and Trade (GATT). After lowering of tariffs, the principle of protectionism
demanded the introduction of new NTBs such as technical barriers to trade (TBT). According to
statements made at United Nations Conference on Trade and Development (UNCTAD, 2005), the
use of NTBs, based on the amount and control of price levels has decreased significantly from 45% in
1994 to 15% in 2004, while use of other NTBs increased from 55% in 1994 to 85% in 2004.
Increasing consumer demand for safe and environment friendly products also have had their impact
on increasing popularity of TBT. Many NTBs are governed by WTO agreements, which originated in
the Uruguay Round (the TBT Agreement, SPS Measures Agreement, the Agreement on Textiles and
Clothing), as well as GATT articles. NTBs in the field of services have become as important as in the
field of usual trade.
Most of the NTB can be defined as protectionist measures, unless they are related to difficulties in the
market, such as externalities and information asymmetries between consumers and producers of
goods. An example of this is safety standards and labeling requirements.
The need to protect sensitive to import industries, as well as a wide range of trade restrictions, available
to the governments of industrialized countries, forcing them to resort to use the NTB, and putting
serious obstacles to international trade and world economic growth. Thus, NTBs can be referred as a
new of protection which has replaced tariffs as an old form of protection.
Self-Assessment

1. Choose the correct options:
(i) Protecting domestic producers against import competition:
(a) Helps those producers.
(b) Helps domestic consumers of the product.
(c) Probably helps the importing nation as a whole.
(d) All of the above.

LOVELY PROFESSIONAL UNIVERSITY 101