Definition
Non-Tariff Barriers (NTBs) refer to restrictions on trade that are not related to tariff rates, such as quotas, import licensing systems, subsidies, regulations or policies that favor domestic industries and hinder international trade. They also include things like product standards, sanitary regulations, and other bureaucratic or legal issues that could limit the ability of foreign producers to sell their goods in a market. In essence, they are measures other than tariffs that restrict trade flows.
Key Takeaways
- Non-Tariff Barriers (NTBs) refers to restrictions that result from prohibitions, conditions, or specific market requirements that make importation or exportation of products difficult and/or costly.
- NTBs also include unwarranted and/or harmful bureaucratic hurdles and arbitrary decision-making processes which might discriminate against foreign products, making them less competitive in comparison to domestic equivalent products.
- Non-Tariff Barriers can come in many forms such as sanitary and phytosanitary measures, technical barriers, import licensing, export restrictions, customs surcharges, anti-dumping measures, and unnecessarily restrictive standards. They are often more effective in trade restriction than traditional tariff barriers.
Importance
Non-Tariff Barriers (NTBs) are significant in finance as they represent restrictions on trade that aren’t levies or tariffs.
These may include quotas, embargoes, sanctions, levies, and other restrictions, and they can significantly impact international trade and economic stability.
Infused into trade policies, these barriers are often used as a tool by governments to protect domestic industries and control the volume and nature of goods/services imported or exported.
NTBs can affect the price, quantity, and variety of available goods, affecting market competition, economic development, consumer choices, and pricing.
Hence, understanding NTBs is crucial for businesses and policymakers to navigate international markets effectively, safeguard domestic interests, and influence global trade dynamics.
Explanation
The purpose of Non-Tariff Barriers (NTBs) is generally to protect domestic industries, control the influx of foreign goods and services, and balance trade between nations. NTBs are usually implemented by a country to safeguard its domestic businesses and market from global competition.
They are also used to regulate and maintain quality standards for imported goods, which in turn protects consumers. Hence, NTBs play a key role in controlling the quantity and quality of foreign goods and services entering the domestic market.
Another critical aspect of Non-Tariff Barriers is in the support of domestic policies. They provide governments with a means to enforce policies such as environmental standards or societal values, which might not be as stringent in other countries.
This function of NTBs thereby manifests in regulations like product labelling requirements and quality standards. Hence, the use of NTBs, when applied responsibly, ensures not just economic protection but environmental sustainability and societal wellbeing as well.
Examples of Non-Tariff Barriers
Import Quotas: An import quota is a type of non-tariff barrier where the government sets a limit on the quantity of a particular good that can be imported during a specific period. For example, the United States government has at times set quotas on the import of certain types of textiles and clothing from particular countries, such as China, as a means to help protect domestic industry.
Technical Barriers to Trade: These are specific requirements or standards that imported goods must meet. For instance, European countries often have strict standards in terms of environmental impact, quality of goods and safety measures. If a company from a non-European country wishes to export its products to Europe, it may need to significantly alter them in order to meet these standards, which can act as a barrier to trade.
Licensing Requirements: This is where a government requires an import license for certain goods. For example, a company that wishes to import certain types of technology or machinery into India may need to apply for an import license from the Indian government. The process can be lengthy and challenging, effectively acting as a barrier to trade.
FAQs on Non-Tariff Barriers
What are Non-Tariff Barriers?
Non-Tariff Barriers (NTBs) refer to restrictions that result from prohibitions, conditions, or specific market requirements that make importation or exportation of products difficult and/or costly. NTBs also include unjustified and/or improper application of Non-Tariff Measures (NTMs) such as sanitary and phytosanitary (SPS) measures and other technical barriers to trade (TBT).
What are some examples of Non-Tariff Barriers?
Non-Tariff Barriers can take many forms, such as import quotas, subsidies, customs delays, technical barriers, or excessive import license requirements. They are a way to control the import or export of goods and services without using explicit tariffs.
What is the impact of Non-Tariff Barriers on trade?
Non-Tariff Barriers can significantly affect international trade. They may impede the import or export of goods or services and can make trade between countries less efficient. While they can protect domestic industries from foreign competition, they can also create a hindrance to trade and economic growth.
How does one overcome Non-Tariff Barriers?
Overcoming Non-Tariff Barriers often involves diplomacy and trade negotiation. Countries need to establish trade agreements that outline the rules and regulations for trade, including the management of NTBs. Additionally, countries can work to improve their national logistics, regulations, and standards to meet international requirements.
Related Entrepreneurship Terms
- Import Quotas
- Customs Delays
- Technical Barriers
- Subsidies
- Local Content Requirement
Sources for More Information
- World Trade Organization (WTO): WTO provides wide information on trade topics including Non-Tariff Barriers.
- The World Bank: An international financial institution that provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects. It is a source of financial and technical assistance.
- International Monetary Fund (IMF): It provides financial support and makes it available quickly to member countries facing balance of payments problems.
- United Nations Conference on Trade and Development (UNCTAD): UNCTAD provides analysis, facilitates consensus-building, and offers technical assistance to promote development.
