Important Differences Between Tariff and Non-tariff Barriers

Tariff Barriers

Tariff barriers refer to taxes or duties imposed on imported goods by a government. These taxes or duties are added to the cost of imported goods, making them more expensive and less competitive in the domestic market. The purpose of tariff barriers can vary, but they are often imposed to protect domestic industries by making imported goods more expensive than locally produced goods.

Tariff barriers can take different forms and can be imposed by both developed and developing countries. Some examples of tariff barriers include import duties, export duties, transit duties, and specific or ad-valorem duties. Revenue tariffs are imposed to generate revenue for the government, while protective tariffs are imposed to protect domestic industries from foreign competition. Countervailing and anti-dumping duties are imposed to offset subsidies and dumping practices, respectively, by foreign companies.

Examples of Tariff Barriers

There are various examples of tariff barriers that can be imposed by governments. Some common examples include:

• Import duties: These are taxes or fees imposed on imported goods by the government of the importing country. The purpose of import duties is to make foreign goods more expensive, thereby protecting domestic industries from foreign competition. Import duties can be specific (fixed amount per unit of a product) or ad-valorem (based on a percentage of the product’s value).
• Export duties: These are taxes or fees imposed on goods leaving the country by the government of the exporting country. The purpose of export duties is to generate revenue for the government or to control the export of certain goods.
• Transit duties: These are taxes or fees imposed on goods passing through a country to another destination.
• Countervailing duties: These are tariffs imposed on imports to offset the impact of subsidies provided by the exporting country to its domestic industries. The purpose of countervailing duties is to level the playing field between foreign and domestic industries.
• Anti-dumping duties: These are tariffs imposed on imports to counteract the practice of dumping, which is when foreign companies sell their products in the importing country at a lower price than the cost of production. The purpose of anti-dumping duties is to protect domestic industries from unfair competition.
• Protective tariffs: These are tariffs imposed on imports to protect domestic industries from foreign competition. The purpose of protective tariffs is to make imported goods more expensive than domestically produced goods, thereby encouraging consumers to buy domestic products.
• Revenue tariffs: These are tariffs imposed to generate revenue for the government. The purpose of revenue tariffs is to raise funds for government spending.

Forms of Tariff Barriers

Tariff barriers can take various forms, including:

1. Ad valorem tariffs: These are tariffs that are levied as a percentage of the value of the imported product.
2. Specific tariffs: These are tariffs that are levied as a fixed amount per unit of the imported product.
3. Compound tariffs: These are tariffs that combine both ad valorem and specific elements.
4. Protective tariffs: These are tariffs that are imposed to protect domestic industries from foreign competition. They aim to make imported goods more expensive than domestically produced goods.
5. Revenue tariffs: These are tariffs that are imposed to generate revenue for the government. The primary purpose of revenue tariffs is to raise funds for government spending.
6. Countervailing duties: These are tariffs that are imposed on imports to offset the impact of subsidies provided by the exporting country to its domestic industries. The purpose of countervailing duties is to level the playing field between foreign and domestic industries.
7. Anti-dumping duties: These are tariffs that are imposed on imports to counteract the practice of dumping, which is when foreign companies sell their products in the importing country at a lower price than the cost of production. The purpose of anti-dumping duties is to protect domestic industries from unfair competition.

Objectives of Tariff Barriers

Tariff barriers are implemented by governments to achieve various objectives, including:

• Protecting domestic industries: Tariff barriers can be used to make imported goods more expensive than domestically produced goods. This can help protect domestic industries from foreign competition and encourage consumers to buy locally produced goods.
• Generating revenue: Tariff barriers can be used to generate revenue for the government. Import duties, for example, can be a significant source of revenue for many governments.
• Correcting trade imbalances: Tariff barriers can be used to address trade imbalances by restricting imports from countries with which the importing country has a trade deficit.
• Promoting strategic industries: Tariff barriers can be used to promote the development of strategic industries that are seen as vital to a country’s economic, political, or social goals.
• Encouraging the transfer of technology: Tariff barriers can be used to encourage foreign companies to invest in the domestic economy and transfer technology to domestic firms.
• Protecting health and safety: Tariff barriers can be used to protect public health and safety by regulating the import of goods that may pose a health or safety risk.

Essentials Elements of Tariff Barriers

The essential elements of tariff barriers include:

• Tax or Duty: Tariff barriers involve the imposition of a tax or duty on imported goods. The tax or duty is usually calculated as a percentage of the value of the imported goods and is paid by the importer.
• Customs Authority: The tax or duty is paid to the customs authority of the country in which the goods are imported. The customs authority is responsible for collecting the tax or duty and enforcing the tariff barrier.
• Domestic industries: Tariff barriers are often implemented to protect domestic industries from foreign competition. The higher cost of imported goods can make domestic goods more competitive.
• Foreign competition: Tariff barriers are designed to make imported goods more expensive than domestic goods, making it more difficult for foreign producers to compete in the domestic market.
• Consumer prices: The cost of the tariff is passed on to the consumer in the form of higher prices for imported goods. This can make foreign goods less attractive to consumers and protect domestic industries.
• Government revenue: Tariff barriers can be a significant source of revenue for the government. Import duties, for example, can generate significant revenue for many governments.

Non-Tariff Barriers

Non-tariff barriers (NTBs) refer to a wide range of trade barriers that restrict imports or exports of goods or services in ways other than through tariffs or taxes. NTBs are often implemented by governments to protect domestic industries from foreign competition, or to ensure that imported goods meet certain safety or quality standards.

NTBs can have significant economic impacts, as they can limit competition, reduce trade volumes, increase consumer prices, and ultimately hinder economic growth. As such, many countries and international organizations have sought to reduce or eliminate NTBs through various trade agreements and negotiations.

Examples of Non-Tariff Barriers

There are many examples of non-tariff barriers (NTBs), some of which are:

• Quotas: These are limits on the quantity of a particular good that can be imported or exported in a given period. Quotas can be global or country-specific.
• Embargoes: Embargoes are complete bans on the import or export of a particular product, usually for political reasons.
• Licensing requirements: These are requirements for importers or exporters to obtain licenses or permits from the government before they can import or export certain products.
• Technical regulations: These are regulations that set standards for the quality, safety, and performance of products. Technical regulations can make it difficult or costly for foreign producers to comply, giving domestic producers an advantage.
• Sanitary and phytosanitary measures (SPS): These are measures aimed at protecting human, animal, or plant health. SPS measures can include requirements for product testing, inspections, and certification, which can be costly for foreign producers.
• Subsidies: Subsidies are financial incentives given to domestic producers to make them more competitive. This can include direct payments, tax breaks, or other forms of financial assistance.
• Discriminatory government procurement practices: This is when governments give preference to domestic producers when awarding contracts for goods or services.
• Currency manipulation: This is when a government artificially lowers the value of its currency to make its exports cheaper and imports more expensive.
• Intellectual property laws: These are laws that protect patents, trademarks, and copyrights, which can make it difficult for foreign producers to enter a market dominated by domestic producers.

Forms of Non-Tariff Barriers

There are several forms of non-tariff barriers (NTBs), including:

1. Quotas: These are limits on the quantity of a particular good that can be imported or exported in a given period.
2. Embargoes: Embargoes are complete bans on the import or export of a particular product, usually for political reasons.
3. Licensing requirements: These are requirements for importers or exporters to obtain licenses or permits from the government before they can import or export certain products.
4. Technical regulations: These are regulations that set standards for the quality, safety, and performance of products. Technical regulations can make it difficult or costly for foreign producers to comply, giving domestic producers an advantage.
5. Sanitary and phytosanitary measures (SPS): These are measures aimed at protecting human, animal, or plant health. SPS measures can include requirements for product testing, inspections, and certification, which can be costly for foreign producers.
6. Subsidies: Subsidies are financial incentives given to domestic producers to make them more competitive. This can include direct payments, tax breaks, or other forms of financial assistance.
7. Discriminatory government procurement practices: This is when governments give preference to domestic producers when awarding contracts for goods or services.
8. Currency manipulation: This is when a government artificially lowers the value of its currency to make its exports cheaper and imports more expensive.
9. Intellectual property laws: These are laws that protect patents, trademarks, and copyrights, which can make it difficult for foreign producers to enter a market dominated by domestic producers.
10. Import restrictions: These are restrictions on the import of certain products, such as requirements for a minimum level of local content or a requirement for a local agent or distributor.
11. Export restrictions: These are restrictions on the export of certain products, such as bans on the export of raw materials or limits on the quantity of products that can be exported.

Objectives of Non-Tariff Barriers

The objectives of non-tariff barriers (NTBs) can vary, depending on the specific barrier and the country implementing it. However, some common objectives of NTBs include:

• Protecting domestic industries: NTBs can be used to protect domestic industries from foreign competition, either by limiting the quantity of imports or by imposing technical or regulatory requirements that make it more difficult or expensive for foreign producers to compete.
• Ensuring safety and quality standards: Some NTBs, such as technical regulations and sanitary and phytosanitary measures, are intended to protect consumers from unsafe or low-quality products.
• Protecting national security: Embargoes and export controls may be used to protect national security interests by restricting the flow of goods that could be used for military purposes or that could support hostile countries or groups.
• Reducing trade deficits: Import quotas and other restrictions can be used to reduce a country’s trade deficit by limiting imports and encouraging domestic production.
• Promoting environmental and labor standards: Some NTBs may be implemented to promote environmental or labor standards, such as requirements for sustainable sourcing or fair labor practices.

Essentials Elements of Non-Tariff Barriers

The essential elements of non-tariff barriers (NTBs) can vary depending on the specific type of barrier. However, some common elements of NTBs include:

• Formal or informal requirements: NTBs can be formal requirements established by law or regulation, or they can be informal requirements that are enforced through customs procedures, inspections, or other administrative processes.
• Discriminatory impact: NTBs can have a discriminatory impact on foreign products or producers, either by design or by the way they are implemented.
• Non-transparent or unpredictable: NTBs can be non-transparent or unpredictable, making it difficult for foreign producers to understand and comply with the requirements.
• Administrative burden: NTBs can impose an administrative burden on foreign producers, requiring them to submit extensive documentation, undergo lengthy inspection procedures, or navigate complex regulatory frameworks.
• Ambiguity or vagueness: NTBs can be ambiguous or vague, making it difficult for foreign producers to understand what is required of them or how to comply.
• Lack of scientific or technical justification: NTBs may lack scientific or technical justification, or they may be based on outdated or insufficient evidence.

Important Differences Between Tariff and Non-Tariff Barriers

Here are some important features and differences between tariff and non-tariff barriers in a table format:

Key Difference Between Tariff and Non-Tariff Barriers

In addition to the important features mentioned in the table, there are key differences between tariff and non-tariff barriers:

1. Legal basis: Tariff barriers have a clear legal basis as they involve taxes and duties that are imposed by governments on imported goods. Non-tariff barriers, on the other hand, may not have a clear legal basis and can include a variety of measures such as technical standards, import licenses, and quotas.
2. Trade impact: Tariff barriers typically have a more direct impact on trade by raising the cost of imports and reducing the quantity demanded by consumers. Non-tariff barriers can have more varied impacts on trade, as they can affect the quantity, quality, and competitiveness of imported goods.
3. Policy objectives: Tariff barriers are often used to protect domestic industries from foreign competition, while generating revenue for the government. Non-tariff barriers can serve a wider range of policy objectives, such as promoting public health and safety, protecting the environment, and enforcing intellectual property rights.
4. Political sensitivity: Tariff barriers are often subject to political pressure and can be a contentious issue in international trade negotiations. Non-tariff barriers can also be politically sensitive, but may be more difficult to identify and address due to their varied nature.
5. Administrative complexity: Tariff barriers are relatively straightforward to administer, as they involve the collection of taxes and duties on imports. Non-tariff barriers can be more complex to administer, as they may involve a range of regulatory and administrative measures that can be difficult to enforce.

Similarities Between Tariff and Non-Tariff Barriers

Despite the differences between tariff and non-tariff barriers, there are some similarities between these trade barriers:

1. Both are used to restrict or regulate international trade: Tariff and non-tariff barriers are both tools used by governments to restrict or regulate the flow of goods across international borders.
2. Both can be used to protect domestic industries: Governments may use both tariff and non-tariff barriers to protect domestic industries from foreign competition.
3. Both can have economic consequences: Tariff and non-tariff barriers can both have economic consequences for countries that use them, as well as for the countries that are subject to them. For example, tariff barriers can lead to higher prices for consumers and reduce the competitiveness of domestic industries, while non-tariff barriers can increase the cost and complexity of doing business in foreign markets.
4. Both can be subject to international trade agreements: Tariff and non-tariff barriers are both subject to international trade agreements, such as the World Trade Organization (WTO) agreements, which aim to reduce and eliminate these barriers to promote free and fair trade.

Conclusion Between Tariff and Non-Tariff Barriers

In conclusion, both tariff and non-tariff barriers are used by governments to regulate international trade and protect domestic industries. Tariff barriers involve the imposition of taxes or duties on imported goods, while non-tariff barriers involve the use of regulations, standards, and other administrative measures to restrict trade. While tariff barriers are more visible and easier to quantify, non-tariff barriers can be more subtle and have a greater impact on trade. Both types of barriers can have economic consequences, and both are subject to international trade agreements aimed at promoting free and fair trade. Ultimately, the choice between tariff and non-tariff barriers depends on the specific circumstances and objectives of the government in question.