Chesin Ppt Internationaleco 130627072551 Phpapp01

7/30/2019 Chesin Ppt Internationaleco 130627072551 Phpapp01

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NON TARIFF BARRIERS

Submitted By

Chethana.B2nd M.A. in Economics

Manasagangotri

Mysore.Submitted To

Dr.M.Indira

Professor of economics

Manasagangotri

Mysore.


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NON-TARIFF BARRIERS

Meaning:

NTBs are obstacles to imports other than tariffs.

They are administrative measures that are

imposed by a domestic govt to discriminate

against foreign goods and in favour of home

goods.

with the reduction of tariff barriersunder GATT, there has been a growing emergence

of NTBs adversely affecting free trade notion and

norms.


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TYPE OF NTBsThe following are the major NTBs being practised;

Import Quotas

Voluntary export restraints(VERs)

Export subsidy

Countervailing duty

Govt procurement

Customs valuation and classification

Import licensing procedures

Local content regulations

Technical barriers


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IMPORT QUOTAS

Like tariffs,import quotas are another

protectionist device and an old form of traderestriction that came into existence since themercantilist era.

An import quota implies a fixed quantity orvalue of a commodity that has been allowedto be imported in the country during a givenperiod of time.

In practice,quotas may be fixed either in termsof thephysical volume or monetary value ofimports or a combination of the two.


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Quotas assigned in quantitative terms arereferred to as direct quotas and thoseexpressed in value units implying exchange

control,are called indirect quotas.

OBJECTIVES OF IMPORT QUOTAS

1. To regulate imports in an effective manner.

2. To check imports in order to correct anadverse balance of payments.

3. To protect domestic industries from severeforeign competition .

4. To maintain and stabilize domestic price level

by restricting import inflows.


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5. To control speculation in imports.

6.To discourage the import of luxury goods.

7.To strengthen a countrys bargaining power bylimiting import demands.

8.To save the countrys foreign exchange forimporting essential raw materials, capital goodsand other important items.

TYPES OF IMPORT QUOTAS

1.Tariff quota: under this system, a givenquantity of a good is permitted to enter duty freeor upon payment of relatively low duty. Butimports in excess of that quantity are charged a

relatively high rate of duty.


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2.UNILATERAL QUOTA: It is imposed withoutprior negotiation with foreign governments.

3.BILATERAL QUOTA: In this system, quotas are

set through negotiation between the importingcountry and the exporting country.

4.MIXING QUOTA: It is a type of regulation which

requires producers to utilize a certainproportion of domestic raw materials alongwith imported parts to produce finished goodsdomestically.

5.IMPORT LICENSING: Under this, prospectiveimporters are required to obtain a licence fromthe proper authorities for importing any

quantity within the specified quotas.


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S+Qs

QUANTITY

A B

M N

a b

P1

P

D

O Q Q1 Q2 Q3 X

Y

EFFECT OF IMPORT QUOTAS


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1.Price effect: In the above figure D and S are the domestic

demand and supply curves. PB is the foreign

supply curve under free trade which intersectsthe domestic demand curve D at point B and OPprice is determined. Thus the total domesticdemand for the commodity is OQ3. But the

domestic supply is OQ. So QQ3 quantity of thecommodity is being imported under free trade atOP price. Suppose the govt fixes an imports quotaequal to the amount of Q1Q2. Now the totalsupply curve of the commodity S+Q which

consists of the domestic supply plus the quotaamount. It intersects the domestic demand curveat N so that the quota raises the domestic pricefrom OP to OP1. Thus PP1 is the price effect of

the quota.


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2.Protective effect:

In the above figure when Q1Q2 amount of

import quota is fixed, the domestic productionof the commodity increases from OQ to OQ1.Thus QQ1 is the protective effect of the

import quota.3.Consumption effect:

In the figure where under free trade thedomestic consumption of the commodity isOQ3. With the fixation of the quota of Q1Q2amount ,the total domestic consumption fallsto OQ2.


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4.Revenue effect

The determination of the revenue effect of animport quota is quite complicated and difficult

to determine. If the govt auctions the import

licences at the price PP1 Q1Q2 quantity

allowed of the commodity,the revenue effect

of the import quota will be equal to the area

aMNb in the above figure.


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5.Redistributive effect: When the Q1Q2 amount of quota will be imposed,then

the prices will be rises.So the domestic producers earnhigher profits than earlier.It is shown in the abovefigure area of PP1MA.

6.Balance of payments effect:

The balance of payment effect of an import quota isfavorable to the quota imposing country. In the abovefigure where under free trade QQ3 commodity isimported at OP price. The total value of imports is

represented by the rectangle AQQ3B. This represents abalance of payments deficit because the amount paidby the importers. To correct this BOP deficit, an importquota of Q1Q2 is fixed so that the imports are reduced

to this quantity.


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VOLUNTARY EXPORT RESTRAINTS(VERs)

A VER is an agreement by an exportercountrys exporters or govt with an importingcountry to limit their exports to it. It is entered

into by the importing country when itsdomestic industry is suffering from largeimports.

VERs have been adopted bycountries because the use of quotas andtariffs has been forbidden by the GATT. Butthe VERs do not come under the GATT rules.


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quantity

Sd

Sv

Pv

Pw

Q Q1 Q2 Q3O

Z Ra b

Dd

X

Y


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The above figure shows effects of VERs, where Ddis the domestic demand curve and Sd is thedomestic supply curve. At price OPw OQ is

supplied by domestic producers and OQ3 isimported. Now if instead of an import quota ofQ1Q2,a VER of the same quantity is adopted byan exporting country, its effect will be equivalent

to that of an import quota. The only differencebetween VER and import quota is the rent whichgoes to the suppliers of the exporting country.With VER, the domestic demand curve Ddremains the same, but the supply curve Sd shifts

to Sv, so that equillibrium occurs at a higher priceOPv. At the price OPv the quantity OQ1 isdomestically supplied which is greater thanearlier and QQ1 is VER on its imports.


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EXPORT SUBSIDY

An export subsidy is a govt grant to an exportfirm to reduce the price per unit of goodsexported abroad. It enables the firm to sell alarger quantity of its goods at a lower price in theexport market than in the home market.

Export subsidymay be direct and indirect. But direct exportsubsidies are prohibited under the GATTagreement. Therefore, govt resort to indirect

export subsidies in various forms such assubsidised credit, refunds an tariffs on theirinputs, priority in the allocation of scarce rawmaterials, market research, tax concessions,

etc..


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H G K L

S

D

Quantity

E

Ps

Pw

O Q1 Q2Q3 Q4


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In the above figure D and S are the domesticdemand and supply curves,for someexportable goods. with the world price Opwwhich is the above the domestic price(E),thedomestic demand is OQ1 and domestic supplyis OQ2.Supply being greater than demand,the

country exports Q1Q2 quantity.To encourgethe expansion of exports,the govt gives Pw-Pssubsidy for each unit exported.This rises thedomestic price to OPs. At this price,the

demand for the goods falls to OQ3,but itssupply increases to OQ4. Finally we can saythat, if the country subsidising its products,then its net welfare loss is greater.


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COUNTERVAILING DUTY

A countervailing duty is an import duty or

tariff imposed by an importing country to

raise the price of a subsidised export product

to offset its lower price.

This analysis assumes that,

1. The export good is subsidised.

2. The supply of the good is perfectly elastic.

3. The importing countries imposes the duty on

this good equal to the export subsidy.


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Q Q1

Pw

Ps

Quantity

O

F

E

GH

C

E1

S

S1


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In the above figure Dm and PwS curves areimport demand and supply curves. Before thesubsidy, OQ quantity of the good is beingexported and imported at OPw price. When thesubsidy given to the good, the supply curve PWsshifts down to PsS1 by the full amount of thesubsidy .Assuming that there is no change indemand for imports with the fall in price to OPs,

the new equilibrium is established at point E1and imports increase from OQ to OQ1. Eventhough the subsidy benefits(F+G) the foreignconsumers of the good, the importing country

suffers a loss in production of this good due to itslower price equal to the area H.TO offset this,itimposes a countervailing duty equal to the exportsubsidy. As a result, the price of the productincreases.


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GOVT PROCUREMENT

Govts discriminates between domestic and

foreign suppliers. The discrimination may be in

various ways. In certain countries, there islegislation to buy domestic goods and services

even if they are available from abroad at low

rates.


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CUSTOMS VALUATION AND

CLASSIFICATION

Various commodities are described in the

customs list and separate tariffs rate are

prescribed for each category. The customs

officials often charge high tariff rates by theirown categorisation of goods with high rates.

Such procedures restrict imports because they

make them dearer and non-competitive in thelocal market. They are meant to create

uncertainty among importers.


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IMPORT LICENCING PROCEDURES

Many countries adopt complicated and

expensive import licencing procedures to

restrict imports.

Such procedures restrict imports. For examplelicence etc..


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LOCAL CONTENT REGULATIONS

In many developing countries,import of manufactured

products like cars, TVs, computers, etc..are restricted

If they do not meet local content regulations.

TECHNICAL BARRIERS

Technical barriers are of various types which restrict

imports. They include health and safety regulations,sanitary regulations, labelling and packaging

regulations.etc..


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CONCLUSION

In this way NTBs work as a barriers to international

trade. After the forbidden of tariffs by GATT, NTBs

are the major obstacles to international trade.Through this many countries restricting and

regulating imports in order to protect domestic

industries from foreign competition.

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Chesin Ppt Internationaleco 130627072551 Phpapp01