History Of The Non Tariffs Measures

Published Date: 02 Nov 2017

While tariff is a tax imposed on imported goods representing one of the diverse trade policies that a nation can endorse, non tariff barriers/measures is defined to include export restraints, subsidies on export and production or measures with comparable effect not just import restraints.

Non tariff measures (NTM) basically include any policy measures impacting trade flows other than tariffs. NTMs are divided into three broad categories namely:

NTMs imposed on imports – including import quotas, import prohibitions, import licensing, and customs procedures and administration fees.

NTMs imposed on exports – including export taxes, export subsidies, export quotas, export prohibitions, and voluntary export restraints.

NTMs imposed internally in the domestic economy – including domestic legislation covering health/ technical/ product/ labor/ environmental standards, internal taxes or charges, and domestic subsidies.

It took successive rounds of the World Trade Organisation (WTO) formerly carried out by the General Agreement on Tariffs (GATT) to significantly reduced tariffs barriers. Given the lowering of tariffs in many countries to abide to the rules and regulations of the WTO, demands for protectionism have taken the form of NTMs to restrict trade flows. The latter have a protectionist impact and some of these measures may comprise of non-tariffs barriers.

In brief, NTMs comprises of all the measures that governments might take other than import tariffs which can impact trade flows.

This work is classified as follows: section 1 gives a brief introduction to address the main question. Section 2 discusses what are NTMs and why they are being more and more utilized while section 3 to 6 emphasizes on the history and growing importance of NTMs. Section 7 focuses on the cost and benefits of NTMs. Nowadays, the quantification of NTMs is greatly being taken into consideration, section 8 relates to the relationship between NTMs and international trade and section 9 provides with different measurement of NTMs and finally section 12 concludes with what are countries doing to alleviate NTMs.

Definition of Non tariffs measures

The code of conduct of World Trade Organisation stipulates that none of its members, that is, countries which have signed the WTO chart, should apply tariff measures for any trade exchange between its members. Tariff measures refer to any fee which a country may apply on import or export.

To go around these constraints, member countries now make use of what we call non-tariff measures to impact exports or imports of their country. These measures are non-monetary, i.e there are no fees to be paid on imports or exports. They usually concern regulations or laws on quantity, quality or any other criteria which the country chooses to include in its export or import regulations. These non-tariff measures can be classified in three categories, the first one concerns all criteria which are imposed on imports, the second one on exports and the third one concerns all domestic laws or taxes which refrain import and export of concerned products.

Classification of Non Tariff Measures

Non-Tariff Barriers (NTBs) consist of all the rules, regulations and bureaucratic impediments that facilitate to keep foreign products out of the local markets.

Given the multitude of NTM, UNCTAD with support and collaboration from other organizations including ITC, World Bank and WTO produced a new classification which updates and refines the one developed in the 1990s. This classification takes this into account and develops a tree/branch structure where measures are categorized into chapters depending on their scope and/or design, as described below:

(A) Sanitary and phytosanitary measures(SPS)

Sanitary and phytosanitary measures include laws, decrees, regulations, requirements, standards and procedures to protect human, animal or plant life or health.

(B) Technical barriers to trade (TBT)

Technical barriers to trade are regulations/standards referring to technical specifications of products and conformity assessment systems thereof.

(C) Other technical measures

Pre-shipment inspection, special customs formalities not related to SPS/TBT and other special customs formalities not related to SPS/TBT.

(D) Price control measures

Price control measures are implemented to control the prices of imported articles in order to: support the domestic price of certain products when the import price of these goods is lower; establish the domestic price of certain products because of price fluctuation in domestic markets, or price instability in a foreign market; and counteract the damage resulting from the occurrence of "unfair" foreign trade practices.

(E) Quantity control measures

Quantity control measures are aimed at limiting the quantity of goods that can be imported, regardless of whether they come from different sources or one specific supplier. These measures can take the form of restrictive licensing, fixing of a predetermined quota, or through prohibitions.

(F) Para-tariff measures

Other measures that increase the cost of imports in a manner similar to tariff measures are known as para-tariff measures. Four groups are distinguished: customs surcharges; additional taxes and charges; internal taxes and charges levied on imports; and decreed custom valuation.

(G) Finance measures

Financial measures are intended to regulate the access to and cost of foreign exchange for imports and define the terms of payment. They may increase import costs in the same manner as tariff measures.

(H) Anti-competitive measures

Measures to grant exclusive or special preferences or privileges to one or more limited groups of economic operators, for social, fiscal, economic or political reasons.

(I) Export related measures

Export related measures are measures applied by the government of the exporting country on exported goods.

(J) Trade related investment measures

Local content measures, which restrict the level of imported components and trade balancing measures.

(K) Distribution restrictions

Restriction to limit and rule the way the products are distributed. It may be controlled through additional licensing or certification requirements.

(L) Restriction on post-sales services

Measures restricting producers of exported goods in exporting countries providing post-sales service in the importing country.

(M) Subsidies

Financial contribution by a government or government body to a production structure, be it a particular industry or company, such as the direct transfer of funds or potential transfer of funds (for example grants, loans, equity infusions), payments to a funding mechanism and income or price support.

(N) Government procurement restrictions

Measures controlling the purchase of goods by government agencies, generally by giving preference to national providers.

(O) Intellectual property

Intellectual property legislation covers patents, trademarks, industrial designs, layout designs of integrated circuits, copyrights, geographical indications and trade secrets.

(P) Rules of origin

Rules of origin cover laws, regulations and administrative determinations of general application applied by government of importing countries to determine the country of origin of goods.

(Q) Export Measures

It groups the measures a country applies to its exports. It includes export taxes, export quotas or export prohibitions

Characteristics of Non Tariff Measures

The Reduction in Quantity of Imports. Non Tariff Barriers (NTBs) are most often imposed with the intent of reducing the quantity of imports.

The Increase in Price of Imports. NTBs succeed in reducing the quantity of imports only to the extent that they raise the actual or shadow price of imports to demanders. This price increase has further implications for economic performance in other sectors of the economy, especially if the import is an intermediate input, and it is thus an important measure of the size of an NTB.

The Change in the Elasticity of Demand for Imports. NTBs often alter the slope of the demand curve for imports, and thus they alter the responsiveness of imports in a particular sector to price changes. Most often NTBs such as quotas reduce this elasticity, though it is also possible for some particular kinds of NTB to increase it.

The Variability of NTBs. Another important feature of NTBs is the extent to which their effects vary over time. Unlike tariffs, NTBs often are defined relative to a benchmark quantity or price independently of market conditions.

The Uncertainty of NTBs. All government policies are uncertain in their implementation, but this seems to be especially true of some NTBs. Indeed, some practices such as antidumping and countervailing duty investigations have been identified as NTBs almost entirely because of the uncertainties that they impose on international traders.

The Welfare Costs of NTBs. It is customary to measure the welfare costs of an by using consumer and producer surplus to capture the welfare effects of distortions of consumer and producer behavior.

Resource Costs of NTBs. There are certain costs that are associated with the manner in which the NTB is administered, such as direct administrative costs as well as the time and other resources that are wasted by individuals and firms in their efforts to secure the profit opportunities and other benefits that are created by an NTB.

Brief History of NTMs

By definition, Non-Tariff Barriers (NTBs) are protectionist by intent or effect; however, Non-Tariff Measures (NTMs) covers a broader array of regulations affecting traded products covering goods, services and factors of production. Businesses often come across a web of NTMs when they are shipping their products across borders. NTMs are different for countries and products, and they often change as quickly as possible, without least notice. These results in hindrance to exporters who want to enter foreign markets and their importer counterparts. Consequently, a wide range of requirements such as technical regulations, product standards and customs procedures need to be complied with. Because of lack of information, capabilities, and facilities to meet the biggest requirements, businesses in developing countries have to demonstrate compliance with NTMs at affordable costs.

The United Nations Conference on Trade and Development (UNCTAD) has been actively participating, since the early 1980`s, in research and programmatic activities on issues related to NTMs. According to a customized Coding System of Trade Control Measures (TCMCS), collection and classification of NTMs began in 1994. Tariffs, Para-tariffs and NTMs were classifies into over 100 subcategories by this coding system. Concurrently, UNCTAD developed a Trade Analysis and Information System (TRAINS) database, which subsequently grew into the most complete collection of publicly available information on NTMs. Afterwards, collaborating with the World Bank, researches gained access on TRAINS through the Word Integrated Trade Solution (WITS) software application.

The TRAINS database gives a brief description of each NTM, affected or excluded countries and footnotes on the exact product coverage, where available. Even ALADI (the Association Latino-Americana de Integracao) created a comprehensive NTM database of its member countries, and eventually, these data were included in the TRAINS database. UNCTAD_TRAINS does not, however, give any measurement of the restrictiveness of any specific measure, and further improvements are needed, notably with respect to coverage, up datedness and data quality. At the same time, UNCTAD TCMCS also need updates so as to reflect new practices. This was all the more necessary in the light of the growing relative importance of non-core NTMs as an instrument of trade policy.

The eight GATT rounds of multilateral trade negotiations (MTNs) resulted in the steady decline of tariffs rates and gave importance to NTMs as both protection and regulator trade instruments. Available evidence indicates that NTMs are often used as alternative trade policy instruments, as multilateral trade agreements which impose limits on the use of traditional trade policy instruments, such a tariffs. Consequently, NTMs are becoming more important in regulatory trade, and hence almost replaced tariff barriers in manufacturing sectors.

The Growing Importance of NTM

Non-tariff measures are intended to regulate imports into a given country. In terms of agrifood products, such measures are generally technical, sanitary and quality standards such as protected designations of origin (AOCs), but also include specification of GMOs. Little is known about their impact on international trade and on exports from developing countries, yet non-tariff measures are likely to play an increasing role, since tariff measures such as customs duty are constantly being cut under multilateral and regional agreements.

To regulate imports, countries increasingly have to rely on quality standards or quotas.

The main aim of the collaborative work being done under the "NTM-Impact" project is to compile and analyse data on the non-tariff measures imposed on agrifood exports from the European Union (EU) to a certain number of target markets. These data will be compared with the non-tariff measures imposed on rival exporters for these same markets, so as to analyse the relative competitiveness of the EU and rival exporting countries.

Impact of Non-Tariff Measures on Developing Countries

The project is also looking at how private non-tariff measures imposed by the EU and other leading importing countries affect developing countries. For instance, what consequences might new certification requirements have on small-scale producer-exporters in developing countries? Either they abandon the market in question or they adapt to the certification requirements, which risks pushing up the price of their products and making them less competitive.

The technical and scientific results expected from the project and the political messages put across should ensure greater transparency in standards and regulations, and contribute directly to future trade talks within the World Trade Organization and the European Economic Community. Developing countries could thus benefit from trade policies and support for more appropriate marketing programmes.

Benefits and drawbacks of non tariffs measures

Benefits of NTMs

There exist different alternative policy options available to address a given market failure. Non tariff measures in agri-food trade developed a framework for a systemic accounting of economic costs and benefits of NTMs which allows for an economic assessment of the trade-offs among alternative trade-related policies to address the same market failures.

Importing countries have greater control of quantity and price of goods. For example based on studies related to NTMs has demonstrated that the control over quantity increased from 55 in year 1994 to 85% in year 2004. Control over price also increased from 32 to 59% respectively.

Another benefit of NTM is that it helps countries to attain economic development. This would imply that countries would attain economic development by diversifying in new areas where they usually do not have a comparative advantage.

NTM helps to prevent over-specialisation while free trade encourages specialisation that is countries produce goods which have comparative advantage. If there is a change in demand then it may lead to an economic downward if the country relies on one or town products. With protection, countries will therefore produce wider variety of products which means it would avoid specialisation.

NTM gives the infant industries some protection so as it is able to develop a comparative advantage. A newly set industry is unable to compete effectively with the already established industries. Therefore NTM give some protection to the infant industries.

NTMs are deemed necessary to protect health, safety or sanitation and also help to avoid natural resources from being depleted.

Drawbacks of NTMs

Non-tariff measures do not allow specialisation; as a result Word output declines and countries do not reap economies of scale. The country is not better off as it is on making optimum use of its resources and this is why the world output declines.

Moreover productivity also declines as NTM does not allow increases in the national income. Therefore investment decreases such that there is a decline in economic growth.

NTM does not allow a country to import technical know-how, skills, managerial talents and entrepreneurship through foreign collaboration.

NTM does not ensure an equitable distribution of the scarce resources. For example oil rich in Arab countries and these are poorly available in African countries. NTM does not allow these resources to be distributed among countries of the world.

How to reduce non tariff measures

Through its trade programme, The UNECE works to improve their situation, as well as the world economy by helping all countries to reduce non tariff measures.

The trade needs assessment undertaken by the committee on trade and the standards and recommendations draw up by its three subsidiary bodies to reduce non tariff measures are as follows:

Trade facilitation and electronic business

The United Nations Centre for Trade Facilitation and Electronic Business focuses on facilitating national and international trade transactions. There is simplification of processes and procedures through development of different standards and specifications.

Regulatory cooperation and standardization policies

These aim at building a shared regulatory framework and help consumers to achieve greater security and also help to better protect the environment.

Agricultural quality standards

These standards are based on agriculture products which help to define minimum quality requirements.

Non Tariffs Measures and International trade

The basic aim of international trade is to facilitate inter-country trade by allowing countries to produce goods in which they have a comparative advantage. Trading with different countries across the world entails many advantages like for instance, it allows countries to produce good that it does relatively better compared to other countries thus exploiting comparative advantage. At a certain point, when it starts to produce goods in which it has a comparative advantage in bulk, this allows a country to benefit from economies of scale, which eventually lead to a rise in the income level of the country and gives way to efficiency in resource allocation. With the expansion in the country’s productivity, international trade has a positive effect on growth of the country.

Transfer and diffusion of technology many of the times enters a country through international trade. In part, it depends on the volume and the composition of imports. According to some researchers, the size of trade flows and a country’s level of total factor productivity are found to have a positive relationship. Also trade flows allow large amount of knowledge to flow mostly to developing countries. As such distorting trade flows by imposing tariffs is a loss for developing countries themselves.

Moreover, one of the main benefits of free trade is that it increases domestic consumers’ choice given a wider range of imported goods in the domestic market. This leads to a decrease in the price of those goods through competition, due to this wider choice made available to domestic consumer. However, this poses great problem to the local producers and as such many government intervenes in the market to protect domestic industry by imposing tariffs and other trade barriers.

In many developing economies, tariff revenues still represent a vital source of tax revenue. Statistics revealed that:

"In the mid-1990s, tariff revenue exceeded 30 per cent of the government’s total tax revenue in more than 25 developing countries. This contrasts sharply with the situation in high-income countries for which tariff revenues typically represent less than 2 per cent of total tax revenue."

In recent time, the role of tariffs in international trade has significantly declined due to specifically designed international organizations to enhance free trade world widely such as the World Trade Organization (WTO). With the reduction of tariffs and trade barriers, global integration has largely improved which lead to globalization. The WTO has for main task to implement trade agreements among countries across the world and to reduce distortions created by tariffs so that trade is carried out smoothly and freely in the advantage of the consumers, producers, exporters and importers. The emergence of such organizations has made it difficult for a member country to charge tariffs and taxes on imported goods. This is the reason why countries have shifted to non tariffs barriers like quotas and export restraints and specific policies including all the non tariff measures designed are being used widely as a measure nowadays to distort trade flows.

In trade literature, non-tariff measures are mostly estimated through "gravity equations". The latter are econometrics models of trade originated from the Newton’s theory of gravitation. According to this kind of model, the value of trade between any two countries will be positively related to the size of their economies and inversely related to the distance and including other measures of trading costs between them. However, this might defer for different economies.

Measurement of NTMs

Measuring NTBs and their effects is a challenge, because of the heterogeneity of policy instruments and lack of systematic data. A unified approach to measuring NTBs does not exist. Most measurement methods start from a simple partial equilibrium approach looking at a single commodity and attempt to develop a producer, consumer, or trade tax equivalent to the NTBs that explains by how much supply and/or demand or trade are affected by the policy intervention. Most NTB analyses implicitly rely on a framework that accounts for three economic effects: the regulatory protection effect providing rents to the domestic sector; the "supply shift" effect, which reflects the increased costs of enforcing compliance of the NTBs on foreign and sometime domestic suppliers; and the "demand-shift" effect, which takes into account the fact that a regulation may enhance demand with new information or by reducing an externality.

The measurement of an NTB is hard to disentangle from the measurements of its effects on market equilibrium and trade. Most NTB measures and analyses focus on the increase in the price of imports resulting from the NTB, the resulting import reduction, the change in the price responsiveness of the demand for imports, the variability of the effects of the NTB, and the welfare cost of the NTB. Several NTBs based on a price intervention (e.g., export subsidies, countervailing duties) are a tax instrument. More complex NTBs can sometimes be represented by a set of taxes, such as in the case of a domestic content requirement. These NTBs can be analyzed as these types of taxes. To develop a tax equivalent, a basis of equivalence has to be chosen. The tax equivalent has to lead to an equivalent protection level (same profit under the tax equivalent or the NTB); a price increase equivalence (a price wedge); or a consumption, production, or trade equivalent. This choice of basis depends on the intended policy analysis.

However, many NTBs do not easily translate into a tax-equivalent instrument. They require more sophisticated and indirect approaches to be measured and to quantify their effects on import volume, price, and welfare. Round-about approaches are also used because of lack of data on the direct implications of an NTB on the cost of production and consumer decisions (Beghin and Bureau, 2001).

The price-wedge method

The price-wedge method measures the impact of an NTB on the domestic price of a good in comparison to a reference price, often the border price of a comparable good. The aim of this method is to derive a tariff/tax equivalent to the NTB as previously discussed, and use the tariff/tax equivalent in further analysis that measures implications of the NTB on resource allocation in the given markets affected by the NTB. Deardorff and Stern (1998) provide price-wedge equivalent formulas for an extended coverage of NTBs. Conceptually, the measure compares the domestic price that would prevail without the NTB to the domestic price prevailing in the presence of the NTB assuming the price paid to suppliers remains unchanged. However, these prices are practically unobservable. Implementations of the price-wedge measure of an NTB compare the domestic and foreign prices of comparable goods in the presence of the NTB accounting for tariffs, transportation costs, and other known and observed trading costs. Adjustments can be made to recover a price estimate that would prevail in the absence of the NTB, using observed levels of quantities and prices, and own-price elasticities of demand, supply, and imported goods. The price-wedge method has several drawbacks. First, if several NTBs are jointly in place, the price-wedge measures the price effect of these policies without being informative about their respective contributions or even their nature. Second, quality differences are hard to account for precisely, although they are a pivotal element of the price-wedge computation. The price-wedge estimate of an NTB is usually sensitive to the assumptions made on the substitution between the imported and domestic goods. This method also has some limitations in large empirical studies for which data are aggregated, resulting in loss of information on quality differences between import and domestic comparable goods. Finally, trading costs may be present but not accounted for, and the price-wedge method may falsely attribute these trading costs to an NTB.

Inventory-based frequency measures

These measures count the number or frequency of regulations and barriers present in a given market. They are used in both quantitative and qualitative assessments of the incidence of NTBs. Common measures include the number of regulations and policies, which can be further elaborated to indicators such as the number of pages of national regulations. Frequency of trade detentions at borders is also used, and so are survey based frequency and number of complaints reported by exporters for perceived discriminatory regulatory practices. When implemented, quantitative estimates often rely on catalogues of technical barriers (identification and description) using datasets such as UNCTAD’s TRAINS dataset. Measures include simple frequency of occurrence of NTBs, frequency ratios for product categories subject to an NTB; and a coverage ratio based on the value of imports of products within a category subject to an NTB, expressed as a share of import value of the corresponding category. Relative measures can also be developed comparing the latter frequency measures in a given country with respect to accepted international norms or best practices, for example, for SPS or food safety regulations. Alternatively, frequency measures can be compared across commodities or across countries to identify large deviations from average frequencies, flagging potential protectionist issues. NTBs vary in importance across sectors and products. Even for a given NTB type, its effects may vary across products. A major drawback of the frequency measures is that a correlation between the number of NTBs and their effect on trade and welfare may be low in absolute value. International datasets on NTB inventories may also suffer from uneven reporting by countries and heterogeneous coverage of measures across countries and commodities. Survey-based measures focus on effective barriers rather than on just an NTB count. However, they may suffer from various reporting biases, as surveys and respondents are often motivated by mercantilism to facilitate exports by the responding exporters.

Frequency measures do not identify the trade restrictiveness of NTBs but can be used in gravity equations to identify the effects of NTBs on trade flows. When trying to quantify NTBs, an obvious technique is to consider the foregone trade that cannot be explained by tariffs and known trading costs. NTB frequency measures, or in certain cases the level of standards themselves, can help identify the trade effects of these NTBS. Provided there is enough variability across countries or over time in the measure (e.g., the level of toxic residues), they can explain the variation in trade flow not explained by other explanatory variables included in the gravity equation (e.g., respective incomes of trading countries, distance, tariff, and other variables measuring border effects). Gravity-equation techniques attempt to measure the trade impact of NTBs, not their welfare impact, and may therefore ignore some of the beneficial effect of the regulations that correct negative externalities but restrict trade. NTBs are appropriate if trade is the vector of negative externalities such as unsafe food imports or pest-infested imports. In addition, the direction of the effect of the "NTB" variable on trade flows in the regression is not constrained. It is possible to capture a trade or demand-enhancing effect of regulations and standards. This enhancement occurs when the NTB facilitates trade and induces consumers to consume more of a product, though the product’s price is higher because of the NTB. Such expansion through standards has been observed in OECD (Organisation for Economic Co-operation and Development) food trade (Disdier, Fontagné, and Minouni, 2006).

Risk assessment approaches

Risk assessment approaches combined with scientific knowledge can contribute to gauging a subset of NTBs, especially safety and SPS standards and regulations. These approaches can contribute to assessing the welfare effects and the potential protectionism of these types of NTBs. Scientific knowledge can determine if a regulation is science based or not, or if a risk simply does not exist or is negligible. This criterion is used by the WTO in its assessment of TBT and SPS regulations. Cost-benefit calculations combined with risk assessment provide expected cost and benefits of such types of NTBs. Risk-assessment measures provide an economic criterion to gauge the desirability of an NTB and its likely protectionist nature if externalities are small and if its costs greatly exceed its benefits in expected terms. The combined use of scientific knowledge and cost-benefit assessment of an NTB is a demanding process suitable for a detailed analysis of a specific case study rather than for large-scale multi-market analyses. Another limitation of this approach is the partial knowledge of health, environmental, and other risks associated with trade and their economic significance. NTB measures are an essential step in computing welfare effects of the NTBs. Beyond welfare effects; these measures are also useful for policy purposes. WTO disputes frequently arise alleging that some NTBs impede trade more than necessary to achieve some legitimate objective or that they are just protectionist. These NTB measures are used in the formal dispute process to estimate export market losses and price lowering effects of the incriminated policy.

Reasons why increase in NTM is hampering trade

Rises in non-tariff measures (NTMs) have become a major hurdle to world trade in spite of the signing of diverse trade agreements between countries. In its trade and development report for 2006, the United Nations Conference on Trade and Development (UNCTAD) held that although there have been reductions in tariff barriers in recent years, countries are now enforcing regulations that have an impact on trade.

The problems arise when the reason of these technical procedures goes past the reasonable protection policy aims. Some countries may deliberately misuse them as a device of trade policy, so that it can as a result develop into a concealed form of protectionism by unjustly limiting imports, thus discriminating against overseas producers while supporting local ones.

Non Tariff Measures are definitely impeding trade but have been rising over the preceding 20 years while tariffs have decreased. While the GATT and the WTO had previously intended to encourage free trade and eradicate trade barriers, countries are now using more and more non tariff measures. Ultimately It was in the Kennedy Round Negotiations (1963-69) that the decision to incorporate NTM’s in the negotiations was taken. It comprised of the decision of developing a stock of non tariff measures and the development of an Anti-Dumping Code.

Different types of Non Tariff measures will hamper trade in different ways. Below are some Non Tariff measures and their respective impact on trade:

Para-tariff measures

Extra costs and internal taxes charged on imports together have the same result on the price of the good on which they are imposed. If those goods are raw materials required for the exportation of final goods that are produces from those materials, exportation may suffer since the cost of production will rise and the exporters may have to include this rise in cost of production in the price of the final goods and people may choose not to purchase them.

Price control measures

Several countries have tried to enforce an anti-dumping measure so as to guard their local industry. However, Anti-dumping is a costly form of protection and that only big and leading producer in concentrated industries are the only ones who will benefit from such protection.

Furthermore, subsidies are also a type of price control measure. A subsidy on a good will promote increase supply of the product by the producer. Subsidies can hinder other firms/countries to launch their products into a state where products of similar nature are subsidised, therefore, trade will not be liberalised.

Finance measures

There can be transfer delays in all step of a transaction, especially deliberate transfer delays which hinder trade. It should also be noted that transfer delays in money transaction may lead to disagreements and at times to a absolute termination to trade between countries. Besides, transfer delays may discourage people from doing transactions with those countries which are known for that. As such, there will not be free trade and both the importer and exporter will be penalised. The importer will lose in the sense that he may miss a good deal and for the exporter, he will be penalised as his goods or services were not sold.

Licensing measures

One-time license is an element of quota which is present since the exporter/importer is confined to the quantity he may export/import. It not only hampers trade, but also involves costs which could have been avoided if the general license was used. Moreover, given that it is a one-time license, importers/exporters will have to reapply for that license if ever they want to continue the import/export of the products. Given that a certain limit has been imposed, the exporting country loses the opportunity to obtain more foreign currencies and a chance for it to increase its production, thus increase in its economic activity. It also prevents the industry to expand where they could have benefited from economies of scale.

Quantity control measures

A quota involves a limit in the choice of population since a quota may imply shortages in that particular good. As such, people who have not been able to purchase the imported product will have the only option of buying the domestically produced good. . This definitely hampers trade since there is no free movement of goods and services.

Quotas, prohibitions, export restraint arrangements and enterprise specific restrictions impose a limit to the quantity of trade transactions which can take place. All of them result in increase in the price of the limited product and other problems.

Monopolistic measures

Single channel for imports and compulsory national services are both examples of monopolistic measures that some countries use and which hamper trade. Single channel for imports is concerned with the exclusive right that are bestowed on state-owned enterprise or a limited group of economic operators and where they are the only ones through which import must be channeled. Compulsory national services are where the government has special privileges of general indemnity and distribution corporations on every or a particular part of imports. It may hamper trade in the sense that the Government may impose a high price for its transportation channel and the importers have no choice but to use that transportation. However if the importers do not have the means or do not think that it is worth it, trade transactions will not take place, thus hampering trade. Moreover, the means of channelling used by those companies having the rights may not be appropriate for the products being exported or the channelling mode is not done on a regular basis.

Technical measures

Technical regulations can hamper trade in the sense that those apply standards which have to be met and which sometime require great investment in order to produce that product and whose price will be high due to the large investments. Even if some regulations are necessary to protect people, environment and animals, there are some which are abusive and contrary to the WTO law

Government procurement

Government procurement in favour of domestic firms can act as a non-tariff barrier which hampers free international trade. Government procurement can be a serious barrier to free trade because governments protect potentially inefficient firms rather than purchasing their equipment from international firms which may carry out production at a lower cost and sell the same products which the government has bought from the domestic suppliers at lower prices. Government procurement creates distortions in international trade as trade is no longer based on competition and efficient allocation of resources does not take place as trade is no longer founded on the principles of the theory of comparative advantage.

Why there is a decrease in level of tariffs supplied by countries member to the WTO?

Imposing a tax on goods imported and exported is called a tariff. Along with GATT, the WTO is also working towards dismantling tariffs barriers to international trade. Tariffs which are remaining, has resulted in economic and commercial inefficiencies. The elimination of tariffs remains one of the potential sources of benefits to all parties. Furthermore, the reason for the decrease in tariffs by member countries is that WTO believes that it will be in the interest of developing and least developing countries, however, it should be taken care that building capacities and the sequence of cutting of tariffs are according to individual situations.

Moreover, the decrease of tariffs is also owing to the free trade agreements, between countries, which involve the elimination of all tariffs substantially. Consequently, adjustments to the entry of duty-free products have already been made by domestic industries. The decrease is also because of the fact that it is expected that the expanding of duty-free status to alike imports from additional countries would not have any negative or misappropriate effect. In addition, the level of tariffs decreased because the benefits of reciprocal duty-free access would outweigh the protection which is limitedly afforded by low tariffs rates. Tariffs disparities are another reason and it is so because the latter does not reflect the development and economic needs of most developing countries. Last but not the least, the advantages of non tariffs measures outweighs the drawbacks of non tariffs barriers, and this is the major reason for the decrease of tariffs by WTO member countries.

What are countries doing to alleviate the problems caused by NTMs?

NTMs are complex instruments and economies feel NTMs` impact through several channels. On a primary level, they act as regulatory instruments against particular market failures; however, distribution of income is affected in multiple ways owing to the impact on market structure, costs and rents. Additionally, cross-border externalities are generated not only through usual channels but also directly by market segmentation. However, this multiplicity of effects is not what keeps them separate, as tariffs are also simultaneously fiscal and trade-policy instruments.

The result of increasing economic liberalization with a widespread tendency to finish or reduce tariffs is that the relative importance of trade barriers resulting from NTMs has risen. Usually, these regulations are implemented, by importing countries, not for protectionist reasons but for the preservations of health of citizens or the environment. Often, when complying with these requirements, it causes more hindrance for exporting companies, especially for Small and Medium-sized Enterprises (SMEs) in emerging and developing countries. Therefore, multilateral rules in the World Trade Organization (WTO) and most recent regional and bilateral trade agreements include provisions on NTMs.

The International Trade Centre (ITC) is actively participating in the analysis of the commercial impact of NTMs and in the building of government and capacities of business through technical cooperation with developing countries. Collaborating with local partners, ITC is conducting large scale company surveys in 30 developing and emerging countries. These surveys will in turn collect information on NTMs specifically from companies with are dealing with trade impediments on a day-to-day basis. The Latin-American and Caribbean region, Peru underwent the assessment first and then it was followed by Uruguay, Paraguay, Jamaica, and Trinidad and Tobago in 2011 and 2012.

In addition to this, non-tariff barriers may be surpassed by exporters by adhering to the quality and standards of good requirement of importing countries. Hence, in this way, importing countries could not be able to prohibit or restrict that goods are not up to standards.

Furthermore, if a non-tariff measure is impossible to eliminate, then the latter should be converted into a tariff. Hence, such action is recommendable for the WTO since its members are bounded by its decisions. Additionally, exporters should work out with their government to see if regional trade agreements can eradicate these barriers. Thus, in return, proliferation of regional trade agreements should be encouraged by the WTO, so that non-tariff measures (NTMs) are eliminated to the maximum.

Last but not the least; many NTMs may exist for legitimate reasons such as consumers’ protection or as a component of the business methods necessary for doing trade. These measures are really NTMs when they are implemented in such a way that there are no additional costs or inhibit trade. In the multilateral context, the WTO is international disputes arbitrator on many NTMs, despite very few NTMs has reached to dispute settlement. Bilateral FTA negotiations also present opportunities to eradicate these problems as well as reduce tariffs, and these opportunities must be taken. In concrete steps towards establishing a FTA, the East African Community (EAC) has already made a remarkable progress on eliminating tariffs on traded goods since 2005 and now it is requesting for a phased technical assistance from the World Bank.

Conclusion

Removing obstacles to trade between nations is not only important for exporters who can thus better penetrate foreign markets and make more money, but also for consumers who can enjoy a wider choice at better prices. Trade liberalisation in the last couple of decades has pushed tariffs down across the world, but other barriers to trade still present problems.

Tariffs have been lowered and so-called non-tariff barriers removed mainly in the framework of the World Trade Organisation (WTO) through: reciprocal tariff concessions (you lower yours, I lower mine); discipline on non-tariff barriers by limiting export subsidies and imposing strict rules on antidumping procedures, subsidies and standards; and dispute settlement, through which governments can "sue" countries that fail to abide by WTO rules.