Non-tariff barriers are policies or procedures that restrict imports without being a tariff, and can be grouped into three categories: those aimed at limiting imports, regulatory barriers, and indirect barriers. Governments use them to protect their industries and balance trade, but international trade organizations promote free trade.
A non-tariff barrier is any policy or procedure that restricts imports but is not a tariff. Tariffs are government taxes on imports and exports that are used to control the balance of trade between one country and another. There is a wide range of national policies and procedures that can have the effect of restricting imports, from national quality standards to unreasonable customs procedures. In general, non-tariff barriers can be grouped into three categories: barriers that are aimed directly at limiting imports to protect a national interest, barriers that are regulatory and have the effect of limiting imports, and indirect barriers.
International trade organizations seek to promote global free trade or open access to markets without restrictions. From a free trade perspective, a company in China should have unlimited access to the US market and vice versa. Product demand should be the ultimate equalizer, and people should be able to make purchasing decisions based on their own needs and not a national government agenda.
Although free trade appears to be the ultimate expression of market capitalism, in reality countries want to protect their own industries, keep their workers employed, and grow their economies. The economy of a country depends on the balance of trade between it and other countries. In other words, governments strive to export more than they need to import, or at least strike an equal balance. If foreign imports exceed exports, it can decimate a domestic industry and negatively impact economic output. A greater number of imports means that less labor was used to make goods at home.
To control imports, governments have traditionally imposed tariffs. Taxing imports makes it more expensive for other countries to access the domestic market. Imposing a tariff is a very direct way of trying to limit imports and is out of favor with international trade organizations. However, a non-tariff barrier can achieve the same result as a tariff without the government establishing a specific import policy.
There are generally three categories of non-tariff barriers. The first category is aimed directly at limiting imports to protect an important national interest, such as the preservation of a particular industry, or the promotion of a public interest, such as reducing unemployment. An example of a non-tariff barrier is an export subsidy or a customs surcharge on imports.
The second category includes barriers that are regulatory and have the effect of limiting imports. These barriers apply to domestic and foreign companies alike, but it tends to be more difficult for the foreign company to meet these standards due to the state of its industry. An example of such a non-tariff barrier is a safety regulation for children’s toys that is standard in a country but difficult for the importer to implement.
Finally, indirect non-tariff barriers are a third category. It includes any measure that is not intended to be a trade restriction but does have that effect. Examples include local laws, customs, and traditions that have the unintended effect of discouraging the purchase of foreign products.
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