Tariff And Non Tariff Barriers Essay

1043 words - 5 pages

International Trade is the branch of economics concerned with the exchange of goods and services with foreign countries. In the context of globalization, International trade has become an even more important topic now that so many countries have begun to move from state-run to market-driven economies. Tariff and non-tariff barriers play a large part in this process.Tariff BarriersTariffs are among the oldest forms of government economic intervention. They are most commonly used as taxes on imports into a country or region. They are put into practice for two clear economic purposes. They provide revenue for the government and they improve economic returns to firms and suppliers to domestic industries that face competition from foreign imports. Tariffs are widely used to protect domestic producers' incomes from foreign competition. This protection comes at a cost to domestic consumers who pay higher prices for imported goods. There are two mains ways of implementing a tariff:* An ad valorem tariff is a fixed percentage of the value of the good that is being imported. Sometimes these are problematic as when the international price of a good falls, so does the tariff and domestic industries become more vulnerable to competition. Conversely when the price of a good rises on the international market so does the tariff, but a country is often less interested in protection when the price is higher. They also face the problem of transfer pricing where a company declares a value for goods being traded which differs from the market price, aimed at reducing overall taxes due.* A specific tariff is a tariff of a specific amount of money that does not vary with the price of the good. These tariffs may be harder to decide the amount at which to set them, and they may need to be updated due to changes in the market or inflation. (Wikipedia.com, 2005A)Non-Tariff BarriersNon-tariff barriers are government laws and restrictions to imports but are not in the usual form of a tariff. They are a means of keeping foreign goods out of the domestic market, while following the multiparty agreements that the country has signed through the World Trade Organization. Two common examples are quotas and counter trade, which even though they are considered non tariff barriers, have the same effect as a tariff, but are only imposed in specific circumstances. Some non-tariff trade barriers are explicitly permitted in very limited circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect natural resources.Non-tariff barriers to trade can be:* State subsidies, procurement, trading, and ownership.* National regulations on health, safety, employment.* Product classification.* Quotas.* Foreign Exchange: controls and multiplicity.* Over elaborate or inadequate infrastructure.* 'Buy national' policy.* Intellectual property laws (patents and copyrights).* Bribery and corruption.* Unfair customs procedur...


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