Nontariff Barriers
Research papers on non-tariff barriers examine specific barriers or can encompass a report on all types of tariff barriers. You decide exactly what you want and our writers custom write the project to examine whatever you need. That is the wonderful part of Paper Masters' services - You are in control!
Non-tariff barriers are a type of restrictive trade in which quotas, embargoes, levies, sanctions, and other forms of restrictions, but not tariffs, are imposed. A tariff is a tax that is placed on imports or exports. Until the early 20th century, much of the funding for the federal government in the United States came from tariffs. The use of non-tariff barriers has risen sharply since the advent of the World Trade Organization (WTO).
There are, in standard definitions, six different types of non-tariff barriers to trade. These include:
- Specific limitations on trade
- Import licensing requirements
- Customs and administrative entry procedures
- Anti-dumping practices
- Standards (packaging, labeling)
- Government participation in trade, which may include export subsidies, charges on imports, and export restraints
One of the reasons that nations have moved towards the adoption of non-tariff barriers is that most nations have sources of income other than tariffs. As previously mentioned, the United States government largely moved away from tariff revenue with the adoption of the graduated income tax in 1913. With the creation of the WTO and the General Agreement on Tariffs and Trade (GATT), many nations have adopted non-tariff barriers as forms of protectionism. In many ways, these non-tariff barriers have simply replaced tariffs in restricting international trade.
Global financing operations are generally impacted only by non-tariff types of barriers such as restrictions on the movement of capital or administrative barriers to prevent or inhibit certain types of transactions such as insurance sales from occurring domestically. In general, there are far fewer barriers to financial transactions than there are for goods and services because of the recognition that the local economy is financially interconnected with the global economy. As a result, financing operations are often used by multinational firms as a means of avoiding the impact of tariff and non-tariff trade barriers. The most common method of avoiding trade barriers is through the use of foreign direct investment (FDI). In this market entry model, a firm invests in developing the means of production in the target country to produce the goods or services inside the political entity that has erected the tariff or non-tariff trade barrier. As a result, the goods or services can directly compete with the domestic goods and services without the price burden of a tariff or the burden imposed by non-tariff barriers such as a quota or countervailing duty. In the area of financial services, there are often greater non-tariff barriers due to national banking, insurance and brokerage regulations and limitations on foreign ownership of certain types of firms. As a result, an acquisition or an FDI market entry strategy may require a partnership with a domestic firm.
In practice, an FDI decision based primarily on the existence of a tariff or non-tariff barrier generally occurs only in larger countries with a market that is substantial enough to justify the investment. While FDI occurs in smaller nations, the intent of the FDI is to engage in production primarily for export from the nation rather than for domestic consumption. In addition, the FDI decision is also based on the ability of the firm to repatriate capital from the foreign operation at some future date, which requires that the host nation does not have any significant capital controls to inhibit or prevent the capital from exiting the country.
There is considerable evidence that government instability as manifested by a frequent change in government is linked to frequent changes in non-tariff barriers to trade. In part, the emphasis of governments on the use of non-tariff barriers in their trade policy is due to domestic pressures for protectionism and the international agreements that restrict national flexibility in changing tariffs. As a result, managing the risk created by trade barriers should have a risk assessment focus on the likelihood that the nation will use non-tariff trade barriers based on its history of their use and the frequency of governmental change. In general, both geographic diversification and political risk insurance can function to mitigate the risk.