Trade Barriers

PGDIB - I
 Trade Barriers
 Trade Barriers can be classified as:
 Tariff Barriers
 Non – Tariff Barriers
 Currency control
 Administration delay
 Tariff Barriers
 Tariffs are the taxes on the goods
that is traded internationally.
 Tariff Barriers can be classified as:
 Specific duty
 Ad Valorem duty
 Compound duty
 Countervailing duty
 Tariff Barriers
 Specific duty:
 It refers to the duty based on the value of
goods. It is calculated on per unit basis.
 Ex: Rs. 2 tax on 1 kg Sugar.
 Ad Valorem duty:
 It is the duty based on the value of the
goods. It is calculated on the basis of
percentage of value of good.
 Ex: 5% tax on whatever volume purchased
 Tariff Barriers
 Compound duty:
 When both type of tariffs are charged on
the same product, it is known as
compound duty.
 It is based on both the unit and the value
of the product.
 Countervailing duty:
 It refers to cancel out the impact of
unfair business practices, such as
subsidy.
 Non - Tariff Barriers
 Barriers influencing Prices :
 Customs Valuation
 Subsidies
 Special Fee
 Barriers influencing Quantity :
 Quota
 Embargo
 Technical Barriers
 Customs Valuation
 Custom officials use a great deal of
carefulness in valuing imported
products.
 Higher the value of the product,
the greater the duty imposed on it
& vice-versa.
 Ex: Semi manufactured goods face
lower rate of duty than
manufactured goods.
 Subsidies
 Subsidy is the benefits provided by
importing government to the
domestic producers so as to
reduce the production cost and
thus the price of that good.
 The provision of subsidy depends
upon the budgetary resources.
 Ex: Cash grants, Low-interest
rates, Tax advantage etc.
 Special Fee
 Special is a kind of fee charged by
the custom officials/authorities for
custom clearance.
 The greater the custom fee, the
larger the value of imported good
and more restricted its import will
be.
 Quota
 It is the direct restriction on the
quantity of some good that may be
imported into a country.
 The importing country prescribes
specific quantum beyond which a
commodity cannot be imported in
a particular year.
 Embargo
 Embargo is an official ban on the
trade with a particular country.
 Due to strained political relation, a
country imposes embargo on
imports from a particular country,
which normally includes all
commodities.
 Ex: UN imposing an embargo on
imports from Haiti in 1993.
 Technical Barriers
 Technical Barriers can be classified as:
 Product & Testing standards:
 It requires foreign government to meet a
country’s product/ testing standards before
they are offered for sale in that country.
 Ex: size, shape, design, performance, labeling,
packaging, processes, etc.
 Indian Exports face lot of such barriers for
export of Rice, Yarn, Meat, Pharmaceuticals,
etc.
 Technical Barriers
 “Buy local” legislation:
 Under this at least Government
departments are forbidden to use
imported goods.

 Import license:

Some countries have a legislation
ensuring that a particular commodity can
be imported only using import license.
 Technical Barriers
 Counter Trade:
 Under counter trade some countries import goods
only in exchange for their own products.
 In such cases, the value of their imports are
limited to the value of their exports.
 It is the bilateral trade where one set of goods is
exchanged for another set of goods.
 It is an alternative means of carrying out an
international transaction when conventional
means of payment are difficult, or not possible.
 Technical Barriers
 Voluntary Export Restrain:
 It is the voluntary restrain by the exporting
country on the exports of a specified
product to help the importing country to
protect its domestic industry.
 Ex: Limitation on auto exports to the US
enforced by Japanese automobile producers
in 1981.
 References
 International Business
 By V. sharan