Barriers to Trade – Tariff & Non-Tariff Barriers

Even under WTO, countries use barriers to trade for various economic and political reasons.

1. Meaning / Definition

Trade barriers are restrictions imposed by governments on international trade in goods and services, which make imports or exports more difficult or costly.

Two broad types: tariff and non‑tariff barriers.

2. Tariff Barriers

Tariff is a tax on imported (or sometimes exported) goods.

Types of Tariffs

1. Ad valorem tariff – percentage of value (e.g., 10% of CIF value).
2. Specific tariff – fixed amount per unit (e.g., ₹5 per kg).
3. Combined / Mixed tariff – combination of both.

Effects of Tariffs

• Raise price of imports; protect domestic producers.
• Generate revenue for government.
• May provoke retaliation from trading partners.

3. Non-Tariff Barriers (NTBs)

Non‑tariff barriers are non‑price measures that restrict trade.

Examples:

1. Quotas – quantitative limits on imports (e.g., only 1 lakh cars can be imported).
2. Licensing Requirements – need special licence for importing certain goods.
3. Standards and Technical Regulations – stringent quality, safety or health standards.
4. Voluntary Export Restraints (VERs) – exporting country agrees to limit exports.
5. Administrative Delays and Procedures – complex documentation, slow clearances.

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4. WTO and Reduction of Barriers

• WTO aims to reduce tariffs through negotiations.
• Also disciplines certain non‑tariff measures that unfairly restrict trade.
• But countries still use legitimate health, safety and environmental standards.

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5. Quick Revision Points

• Trade barriers = tariffs + non‑tariff barriers.
• Tariffs are taxes on imports; NTBs include quotas, licences, standards, administrative controls.
• WTO works to lower barriers but allows necessary regulations.

6. Quiz Time 🎯

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