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What are Non-Tariff Measures? – Impact, Classifications, and More
Trade

What are Non-Tariff Measures? – Impact, Classifications, and More

What are the Non-Tariff Measures?

Non-tariff measures are trade policy measures different from standard measures called tariffs that can affect the international exchange of goods.

The effect of non-tariff measures may be the main objective of the policy (e.g. quotas or bans), or perhaps just the by-product of another policy (e.g. quality control and packaging requirements).

According to the World Trade Organization agreements, the use of non-tariff measures is allowed under some circumstances.

Examples are the Agreement on Technical Barriers to Trade or the Agreement on Sanitary and Phytosanitary Measures. Both negotiated during the Uruguay Round.

These agreements allow governments to pursue legitimate objectives through adopted trade policies, even if they cause a decrease in trade flow. However, non-tariff measures are sometimes used to circumvent free trade rules, and domestic industries favour at the expense of foreign competition.

Additional Information: https://www.theknowledgeblog.com

Impact of Non-Tariff Measures

non tariff measures

  • For many years, a high tariff rate was one of the main barriers to international trade.
  • However, in recent years the tariff rates applied by countries worldwide have decreased to their lowest historical level thanks to the increase in bilateral, regional and multilateral trade agreements.
  • In most cases, the traded goods are not subject to customs duties but must meet regulatory requirements before entering the destination market. Examples of these regulations include import licenses or permits, quality requirements, inspections, and price controls.
  • National regulations are now more critical and are often used by governments as instruments of trade policy.
  • To further complicate the situation, non-tariff measures are very heterogeneous, as different products are subject to other kinds of regulations with varying impacts and can change very quickly.
  • Non-tariff measures can contribute significantly to a general restriction of trade.
  • For example, the equivalence of the ad valorem tariff of specific duties, the impact of Non-tariff measures is not immediately observable.
  • The impacts fluctuate from one country to another or from one sector to another and do not necessarily imply a decrease in trade flows.
  • Sanitary and phytosanitary regulations and Technical Barriers to Trade (BTC), for example, have ambiguous effects on trade.
  • On the one hand, they can raise costs and make it difficult for exporters to access markets.
  • On the other hand, they can also raise consumer confidence regarding the quality of imports, thus increasing demand for the good.
  • Developing countries are the most affected by the adverse effects of non-tariff measures, not only because the regulations are very strict or difficult to comply with but also because they lack the necessary infrastructure to assess whether a product meets the regulation requirements.

Classifications of Non-Tariff Measures

non tariff measures

Due to the varied nature and complexity of non-tariff measures, it is necessary to have a familiar and comprehensive classification system. A classification system is required to:

  • Properly document the regulations that companies must comply with it.
  • Harmonize these measures in different sectors and countries so that they can be compared.
  • Carry out statistical analysis of the tariff measures in the different sectors and countries.
  • To facilitate collecting and disseminating information on Non-Tariff Measures applied by individual countries, a classification system for NTMs.
  • It was prepared by a group of technical experts from eight international organizations – FAO, IMF, International Trade Center, OECD, UNCTAD, UNIDO, The World Bank and the WTO in 2008, with subsequent revisions in 2009 and 2012.
  • This classification first categorizes NTMs into two general categories, technical and non-technical measures, then subdivides them into 16 chapters.
  • Technical measures (Chapters A and B) mention the specific properties of products, such as the characteristics, technical specifications, and product production process.
  • It also includes conformity assessment methods, which affirm the conformity of a product with a given requirement.
  • These technical regulations are generally intended to guarantee food quality and safety, protect the environment and national security, and protect animal and plant health.
  • Non-technical measures (Chapters C to O) do not mention the product’s specific properties but requirements such as commercial requirements, such as transport, customs procedures, trade rules, tax policies, etc.
  • On the other hand, the classification distinguishes between imports (Chapters A to O) when the importing country imposes the measures. And measures related to exports (Chapter P), when the government itself sets them.
  • Additionally, procedural obstacles (OPs) can make it difficult for companies to comply with a given regulation.

Understanding Non-Tariff Measures

  1. Non-tariff measures (NTMs) can define as ‘policy measures, extra than standard customs tariffs.
  2. It can have an economic effect on international trade in goods, changing quantities traded, or prices or both.
  3. These consist of mandatory supplies, rules, or regulations legally set by the exporting, importing, or transportation country.
  4. NTM is a neutral idea and does not necessarily imply a particular direction of impact. It not identical with the frequently used term, non-tariff barrier (NTB). NTB indicates a negative effect on trade.
  5. The Multi-Agency Support Team (MAST) and the Group of Eminent People on Non-Tariff Barriers (GNTB) propose. NTBs are a subsection of NTMs with a ‘protectionist or discriminatory intent.
  6. There is no single, exact type of NTM. Instead, they form a constellation of different kinds of regulations that accompany products throughout their life cycles, from formation through distribution and on to final consumption.
  7. Technical barriers to trade (TBT), sanitary and phytosanitary (SPS) measures, guarantee or challenging requirements, quotas, import or export licenses, additional taxes.
  8. And surcharges, financial measures, rubrics of origin, and many others, are all examples of NTMs.

The Growing Role of Non-Tariff Measures

  • Over several periods, trade liberalization has emerged as a critical development tool. It based on evidence that benefits accrue to countries actively engaged in world trade.
  • The least developed and emerging economies have begun to realize gains through actively active in the multilateral trading system.
  • Concessions finished a series of multilateral, regional and bilateral trade instruments, North-South and South-South, and nonreciprocal compromises. It has led to special discounts in the use of average global tariffs for protectionist interests.
  • With favourable market admission conditions, international trade has soared to previously unseen levels, raising overall welfare and living standards.
  • However, the positive belongings of lower tariffs overshadow by a shift towards the misuse of NTMs.
  • The proper use of NTMs to ensure customer health, protect the environment and safeguard national safety is legitimate. However, evidence proposes that countries are resorting to NTMs as other mechanisms to protect domestic industries.
  • NTMs sell within the General Agreement on Tariffs and Trade and at the World Trade Organization (WTO). Meanwhile, the Tokyo Round (1973–1979) is progressively dealt with in regional and bilateral trade agreements.
  • NTMs have gained importance, with many practitioners seeing they have surpassed tariffs in their trade-impeding effect.
  • Existence ‘defined by what they are not’, NTMs include innumerable policies other than tariff duties.
  • NTMs are compound legal texts precise to the product and applying country.

Conclusion

Non-tariff measures (NTMs) are policy measures other than tariffs. It can potentially have a financial result on international trade in goods. They are increasingly shaping marketing, influencing who trades what and how much.

For exporters, importers and policymakers, NTMs represent a significant challenge. However, many NTMs aim primarily at defensive public health or the environment. They also substantially move trade through information, compliance and reasonable costs.

Understanding the usages and implications of NTMs is essential for developing effective development strategies to meet Sustainable Development Goals.

Also Read: What is the Accounting Equation? – Understanding and More

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