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7/30/2019 Tariff and NTB
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TARIFF AND NON-TARIFF
BARRIERS
Presented by:
Sakshi Kothari(11214)
Parth Trivedi(11241)Priyank Bothra(11249)
Brinda Jadeja(11257)
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PROTECTIONISM
One of the most important features of theinternational trading environment is theproliferation of the trade barriers
Even though the process of eliminationof the tariff barriers has continued, sincearound the mid 1970s the liberalizationtrend in the developed countries has
been replaced by a growingprotectionism
The exports of developing countrieshave been hit much more than those of
the developed ones by protectionism
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PROTECTIONISM (CONTINUE)
A number of problems like thecurrency crisis, oil crisis, debt crisis,
recession, high unemployment and
trade deficits produced an atmospherein which demands for protection
increased dramatically
As a response to this, the developedcountries have increased the non-tariff
barriers (NTBs)
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Reasons forPROTECTIONISM
1. To protect domestic industries fromforeign competition
2. To promote indigenous research and
development
3. To conserve the foreign exchange
resources of the country
4. To make the balance of paymentsposition favourable
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Arguments for Protection
Infant IndustryArgument
DiversificationArgument
Improving the Termsof Trade
lmproving Balance ofPayments
Anti-Dumping Bargaining
EmploymentArgument
National Defence
Key IndustryArgument
The Pauper LabourArgument
Equalisation of Costsof Production
Strategic Trade
Policy
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Demerits of Protection
1. Protection is against the interest ofconsumers as it increases price andreduces variety and choice.
2. Protection makes producers and sellersless quality conscious.
3. It encourages domestic monopolies.
4. Even inefficient firms may feel secure underprotection and it discourages innovation.
5. Protection leaves the arena open tocorruption.
6. It reduces the volume of foreign trade.
7. Protection leads to uneconomic utilization ofworld's resources.
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Trade Policy-Introduction
International Trade policies deals withthe policies of the national governmentsrelating to exports of various goods andservices in various countries either onequal terms and conditions or ondiscriminatory terms and conditions.
Trade policies also aim at protecting the
domestic industry from the competition ofthe advanced countries throughimposing quotas and build competenciesby providing subsidies.
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Instruments of Trade Policy:
Broadly classified into:
Tariff
Non-tariff
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Tariff Barriers
What are tariff barriers?
Tariff designed to make imports more
expensive to protect the domestic
industry. What is the purpose of tariffs?
To protect the domestic industry by increasing the
cost of imported goods.
EXAMPLE: Government of India imposed tariffsto protect domestic automobiles industry, sugar
industry, cement industry and steel industry.
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Types of Tariff:
On the Basis of Purpose:
Revenue Tariff:
To provide state with the revenue.
Levied on luxury goods. Protective Tariff:
To maintain and encourage those branches of
home industry protected by the duties.
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Types of Tariff(contd..):
On the Basis of Origin and Destination:Ad Valorem Duty:
Levied as the percentage of the total value of the
imported common duty.
Specific Duty: Levied per physical unit of the imported
commodity.
Compound Duty:
Levied a percentage ad valorem duty plus a
specific duty on each unit of the commodity.
Eg. 1 lac + 10% of the price.
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Types of Tariff(contd..):
Single Column Tariff:A uniform rate of duty is imposed on all
similar commodities irrespective of thecountry from which they are imposed.
Double Column Tariff: Two different rates of duty have been
imposed.
Triple Column Tariff: Two or more tariff rates levied on each
category of commodity.
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Who Gain from Tariff?
Government of the importing countryearns in the form of the revenue.
Industries of the importing country
would find market for their products asthe imported goods will be expensive.
Jobs in the domestic markets are
saved. Business for the ancillary industry,
servicing, market intermediation etc. is
also protected.
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Who are Adversely Affected?
Consumers
Industries of the exporting country.
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Other Impacts of Tariff
Barriers: Tariff Barriers tend to Increase:
Inflationarypressures.
Special interests privileges.
Government control and political consideration ineconomic matters.
Tariff Barriers tend to Weaken: Balance-of-payments positions.
Supply-and-demand patterns.
International relations.
Tariff barrier tend to restrict: Manufacturers supply sources.
Choices available to consumers.
Competition.
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Non-Tariff Barriers:
Non-Tariff measures include allmeasures, other than tariffs, the effect
of which is to restrict imports, or to
significantly distort trade.
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New Zealand'sapples account fora third of itsagricultural
exports but havebeen banned fromAustralia since1921 due to fearsabout the spread
of fire blight, acrop pest. By Doug Latimer in Sydney
Published: 1:00AM BST 13 Apr
2010
Apples Banned - Non Tariff
Barrier
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McDonald France Big Beef
McDonalds France in 1998, ran a
print ad campaign featuring
overweight cowboys complaining
about the fact that McDonald's
France refuses to buy American
beef but uses only French, to
"guarantee maximum hygienic
conditions" an unsubtle effort
to identify the Global Arches withEuropean efforts to block the
import of hormone-laced
American beef. (Karon, 2002)
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Types of Non-Tariff Barriers:
Specific Limitations on Trade: Import licensing requirements
Quotas
Proportion restrictions of foreign to domesticgoods
Minimum import price limits
Embargoes
Customs and Administrative EntryProcedures: Valuation systems
Anti-dumping practices
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Types of Non-Tariff
Barriers(contd.): Government Participation in Trade:
Export subsidies
Countervailing duties
Changes in Imports:
Prior import deposit subsidies
Administrative fees Special supplementary duties
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Types of Non-Tariff
Barriers(contd.): Standards:
Standard disparities
Intergovernmental acceptances of testing
methods and standards Packaging , labeling and marking
Others:
Voluntary export restraints Monetary barriers
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Impact of Non-Tariff Barriers:
Have emerged as potent Protectionisttool.
It being less transparent, its difficult to
identify and quantify its impact. It is pointed out that Indian, exports of
iron and steel, chemicals, textiles,vegetables and allied categories find
market access very difficult in thedeveloped world, essentially by theimposition of a variety of NTB
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Transition from Tariffs to Non-
Tariffs Barriers: Developed countries can have
sources of income other than tariffs.
These tariffs can be used to support
weak industries or compensation ofindustries, which have been affectednegatively by the reduction of tariffs.
Ability of interest groups to influence
the process in the absence ofopportunities to obtain governmentsupport for the tariffs.
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Difference between Tariff and
Non-Tariff Barriers: The purpose of both tariff and non tariff
barriers is same that is to impose restrictionon import but they differ in approach andmanner.
Tariff barriers ensure revenue for agovernment but non tariff barriers do notbring any revenue. Import Licenses andImport quotas are some of the non tariff
barriers. Non tariff barriers are country specific and
often based upon flimsy grounds that canserve to sour relations between countrieswhereas tariff barriers are more transparentin nature.
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