World practice of using non-tariff restrictions

Non-tariff restrictions

Definition 1
Non-tariff restrictions are regulatory methods used in international trade activities within the framework of customs tariff policy.

There is no general definition of this term; however, non-tariff restrictions include any actions that are aimed at protecting the domestic market. They hinder free trade exchanges.

A study of the impact of non-tariff restrictions has shown that the barrier to international trade is not themselves, but their method of implementation, that is, the way legal acts are applied. Therefore, a classification of barriers has emerged that affect the introduction of various non-tariff measures.

Globalization has led to countries expanding their non-tariff control methods. They have become a legal way of protecting against unfair competition and finding a balance between protectionist policies and free trade. To simplify trade procedures, it is necessary to create favorable conditions for the development and implementation of information technologies.

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Non-tariff regulation affects the following areas of activity:

Introduction of temporary restrictions on exports or imports for certain groups of goods.
Permission to export or import for certain types of goods.
Compliance with the requirements of international treaties.
Ensuring the exclusive right to import or export certain product groups.
Defense of morality and order
Maintaining a high level of national security and cultural values.

Despite the fact that there is no clear regulation on non-tariff measures, there is an unspoken classification that divides them into seven groups. The most well-known are the classifications developed by the WTO and the United Nations in terms of supporting international trade. Measures are classified according to their relationship to imports and exports. They can be technical or non-technical. Export measures most often involve “procedural hurdles.”

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Non-tariff methods of regulating international trade

In most cases, the use of non-tariff methods, especially intensive quantitative ones, along with even a relatively liberal customs regime leads to a more restrictive nature of government trade policy in general.

Quantitative restrictions are an administrative form of non-tariff state regulation of trade turnover that determines the quantity and range of goods allowed for export or import. Quantitative restrictions include quotas (provisioning), licensing and “voluntary” export restrictions.

The most common form of quantitative restrictions is a quota or contingent. These two concepts have almost the same meaning, with the difference that the concept of contingent is sometimes used to denote seasonal quotas.

A quota is a quantitative non-tariff measure of limiting the export or import of a product by a certain quantity or amount for a certain period of time.

According to the direction of their action, quotas are divided into:

export - are introduced either in accordance with international stabilization agreements establishing the share of each country in the total export of a certain product (oil exports from OPEC countries), or by the government of the country to prevent the export of goods that are in short supply on the domestic market (oil exports from Russia and sugar from Ukraine to early 90s);
imported - introduced by the national government to protect local producers, achieve a balanced trade balance, regulate supply and demand in the domestic market, and also as a response to the discriminatory trade policies of other states. For example, the United States imposes a quota of 5.7 million liters on the import of milk and sour cream from New Zealand.

Based on coverage, quotas are divided into:

global - established for the import or export of a certain product for a certain period of time, regardless of which country it is imported from or to which country it is exported. The meaning of such quotas is usually to ensure the required level of domestic consumption, and their volume is calculated as the difference between domestic production and consumption of goods. An example of a global quota is Russia's export of 40 million tons of oil in 1993 for government needs. The direction of export, i.e. the importing country, is not established;
individual - the quota established within the global quota for each country exporting or importing a product. Such quotas are usually established on the basis of bilateral agreements, which give the main advantages in the export or import of goods to those countries with which there are mutual political, economic and other interests. An example of an individual quota is the 21.6 million kg quota on US imports of wheat from Canada. Most often, individual quotas (contingents) are seasonal, i.e. are introduced for a certain period of time when the domestic market is most in need of state protection. Usually these are the autumn months, when the sale of agricultural products from the new harvest takes place.

Licensing is the regulation of foreign economic activity through permits issued by government bodies for the export or import of goods in specified quantities for a certain period of time.

Licensing can be an integral part of the quota process (and then its economic content completely coincides with that discussed above) or be an independent instrument of state regulation. In the first case, a license is only a document confirming the right to import or export goods within the framework of the received quota; in the second, it takes on a number of specific forms:

one-time license - written permission for up to 1 year for import or export, issued by the government to a specific company to carry out one foreign trade transaction;
general license - permission to import or export a particular product during the year without restrictions on the number of transactions;
global license - permission to import or export a given product to any country in the world for a certain period of time without limiting the quantity or cost;
automatic license - a permit issued immediately upon receipt of an application from an exporter or importer that cannot be rejected by a government agency.

Licensing is used by many countries of the world, primarily developing ones, for the purposes of government regulation of imports. Developed countries most often use licenses as a document confirming the importer’s right to import goods within the established quota.

The license distribution mechanisms used by different countries are quite varied:

auction - sale of licenses on a competitive basis. It is considered the most cost-effective way of distributing licenses, capable of generating revenues for the state treasury comparable to revenues from customs duties on the same product. In the United States, for example, since the early 1980s, auctions for the competitive sale of American import quotas began to be practiced, not among potential American importers, but among foreign exporters. The license was awarded to the exporter who offered the highest price for it as the right to export goods to the United States within the quota. Such auctions were held to distribute licenses for the import of VCRs, sugar, cars;
system of explicit preferences - the government assigns licenses to certain firms in proportion to the size of their imports over the previous period or in proportion to the structure of demand from national importers. Typically, this method is used to support those firms that are forced to reduce imports of goods due to the introduction of quotas, which reduces their lobbying pressure on the government to cancel these licenses. In the USA, such a system was used in the early 70s to distribute oil import licenses;
license allocation on a non-price basis - the government issuing licenses to those firms that have demonstrated their ability to import or export in the most efficient manner. Typically, this method requires the formation of an expert commission, the development of evaluation criteria, and the holding of several rounds of the competition, which is inevitably associated with high costs and abuse.

Quantitative restrictions on imports into a country can be achieved as a result of measures taken by the government of the exporting country under so-called “voluntary” export restrictions. A "voluntary" export restriction is imposed by a government, usually under political pressure from a larger importing country, which threatens to impose unilateral import restrictive measures if it refuses to "voluntarily" restrict exports that harm its local export restrictions - a quantitative restriction on exports based on a commitment by one of the trading partners to limit or at least not expand the volume of exports adopted as part of a formal or informal agreement on the establishment of quotas for the export of goods. The overall economic effect for the importer from the use of “voluntary” export restrictions by the exporter is negative, although the size of losses decreases as a result of increasing imports of similar goods from countries that have not imposed “voluntary” restrictions on their exports.

Along with quantitative methods, a significant role among non-tariff methods of trade policy is played by methods of hidden protectionism, which are various non-customs barriers erected on the way of trade by central state and even local authorities.

By some estimates, there are several hundred types of hidden protectionism through which countries can unilaterally restrict imports or exports. Among them:

technical barriers are hidden methods of trade policy that arise due to the fact that national technical, administrative and other rules and regulations are structured to prevent the import of goods from abroad. The most common barriers of a technical nature are requirements for compliance with national standards, for obtaining quality certificates for imported products, for specific packaging and labeling of goods, for compliance with certain sanitary and hygienic standards, including the implementation of environmental protection measures, for compliance with complicated customs formalities and legal requirements. on consumer protection and many others;
internal taxes and fees are hidden methods of trade policy aimed at increasing the domestic price of an imported product and thereby reducing its competitiveness in the domestic market. The taxes imposed primarily on imported goods are varied and can be direct (value added tax, excise tax, sales tax) or indirect (customs clearance, registration and other formalities fees, postal fees). Domestic taxes and fees play a discriminatory role only if they are imposed only on imported goods, while goods from local producers are not subject to taxation. If the rules of domestic taxation are the same for both national goods and imported ones, then such a policy can be considered as a policy of creating equal starting conditions for competition in price and quality. In many cases, domestic taxes exceed the value of the import duty and, moreover, their rate may vary depending on the internal conditions of the local market;
government procurement policy is a hidden trade policy that requires government agencies and businesses to buy certain goods from domestic firms, even though those goods may be more expensive than imported goods. The most typical explanation for such a policy is national security requirements;
the requirement to contain local components is a hidden method of state trade policy, which legislates the share of the final product that must be produced by national producers if such a product is intended for sale on the domestic market. Typically, the requirement for local content is used by developing countries as part of an import substitution policy, which involves creating and expanding a national base for the production of imported goods in order to subsequently abandon their imports. Governments in developed countries use local content requirements to avoid moving production to developing countries where labor is cheaper and thereby maintain employment levels.

Export financing as a method of trade policy should be distinguished from routine financing and lending of export-import transactions, which are simply the provision of working capital by banks for specific commercial transactions. Financing as a trade policy method discriminates against foreign companies in favor of national producers and exporters. The most common financial methods of trade policy are subsidies, lending and dumping.

A subsidy is a monetary payment aimed at supporting national producers and indirectly discriminating against imports.

Based on the nature of payments, subsidies are divided into:

direct - direct payments to the exporter after he has completed an export operation in the amount of the difference between his costs and the income he receives. Direct subsidies are subsidies to the manufacturer when it enters the foreign market. Since the early 60s, the subject of direct subsidies has been expensive industrial exports of developed countries - ships, aircraft, etc. However, direct subsidies are prohibited by WTO rules and their use is too obvious for trading partners, who may use retaliatory measures;
indirect - hidden subsidies to exporters through the provision of tax benefits, preferential insurance conditions, loans at a rate below the market rate, refund of import duties, etc.

Subsidies can be provided both to producers of goods that compete with imports and to producers of goods that are sold for export. For producers in both cases, the subsidy is a negative tax because it is paid to them by the government rather than deducted from their profits.

A domestic subsidy is the most disguised financial method of trade policy and discrimination against imports, providing budgetary financing for the domestic production of goods that compete with imports.

Often governments not only subsidize import-competing industries, but also provide subsidies to exporters.

An export subsidy is a financial non-tariff method of trade policy that provides budget payments to national exporters, which allows them to sell goods to foreign buyers at a lower price than on the domestic market, thereby boosting exports.

The fundamental difference between an import tariff and an export subsidy as a means of trade policy is that an import tariff increases the domestic price of imported goods, while an export subsidy increases the domestic price of exported goods. An import tariff imposed by a large country improves its terms of trade by lowering the price of its imports and increases the relative supply of local import-competing goods while reducing the demand for imports. An export subsidy imposed by a large country has the opposite effect: it worsens its terms of trade, increasing the price of its exports, but also increasing the relative supply of exports and reducing domestic demand for exported goods. An import tariff improves a country's terms of trade at the expense of the rest of the world. An export subsidy worsens a country's terms of trade to the benefit of the rest of the world. Both trade policy instruments have a distorting effect on domestic prices and consumption patterns in the country using them.

Often hidden subsidies for exports are carried out through export credits.

Export credit is a method of financial non-tariff foreign trade policy that provides financial incentives by the state for the development of exports by national firms.

Export credit can take the form of:

subsidized loans to national exporters - loans issued by state banks at an interest rate below the market one;
government loans to foreign importers, subject to the obligatory condition of purchasing goods only from firms in the country that provided such a loan (tied loan);
insurance of export risks of national exporters, which include commercial risks (the inability of the importer to pay for the supply) and political risks (unexpected government actions that prevent the importer from fulfilling its obligations to the exporter).

Export credits are:

short-term - for a period of up to 1 year, used to finance the export of consumer goods and raw materials;
medium-term - for a period of 1 to 5 years; used to finance the export of machinery and equipment;
long-term - for a period of more than 5 years; used to finance the export of capital goods and large projects.

Export credits are sometimes viewed as a type of foreign aid to other countries. The amount of subsidizing through preferential lending is calculated as the difference between the interest rate on the preferential loan and the current market interest rate. In banking practice, interest rates on export loans are usually significantly lower than rates on other types of loans and are often the subject of agreement between countries under cartel agreements. In addition, there are numerous non-quantifiable ways to stimulate exports through export credits, as well as postponing the first loan payments to a longer period, paying loans in the buyer’s currency or in the form of commodity supplies, government preferential insurance for export credits, etc. .

Subsidizing exports in order to boost them in the face of intensified competition can take extreme forms aimed at suppressing competitors and pushing them out of the market.

Dumping is a method of financial non-tariff trade policy that consists in promoting goods to foreign markets by reducing export prices below the normal price level existing in these countries.

Dumping can be carried out both at the expense of the resources of individual firms seeking to take over the foreign market for their products, and through government subsidies to exporters. In commercial practice, dumping can take one of the following forms:

sporadic dumping is the occasional sale of excess stocks of goods to the foreign market at reduced prices. Occurs when the internal volumes of production of a product exceed the capacity of the domestic market and the company faces a dilemma - either not to use part of the production capabilities at all and not produce the product, or to produce the product and sell it at a lower price than the domestic price on the external market;
deliberate dumping is a temporary deliberate reduction in export prices in order to oust competitors from the market and subsequently establish monopoly prices. In practice, this may mean exporting goods at prices below their home market prices or even below production costs;
constant dumping - constant export of goods at a price lower than fair;
reverse dumping - inflating export prices compared to sales prices for the same goods on the domestic market. Occurs extremely rarely, usually as a result of unexpected sharp fluctuations in exchange rates;
Mutual dumping is countertrade between two countries of the same product at reduced prices. It is also rare in conditions of high monopolization of the domestic market for a certain product in each country.

Dumping is prohibited both by international rules within the WTO and by the national anti-dumping laws of many countries, which allow the application of anti-dumping duties if dumping is detected. According to American law, for example, dumping is the sale of goods to the American market at prices “below fair”, causing damage to national industry. Of course, great difficulties arise when determining a fair price level for a particular product. To do this, a special investigation is carried out and the alleged dumping prices are compared with the prices for the given or similar product that prevailed during a certain previous period in the country where the dumping takes place or in the markets of “third countries”. Serious evidence of dumping is the sale of goods at prices below production costs. Based on the results of the investigation, if the fact of dumping is proven, countries have the right to introduce unilateral trade restrictions in the form of anti-dumping duties.

Anti-dumping duty is a temporary fee in the amount of the difference between the sales prices of goods in the domestic and foreign markets, introduced by the importing country in order to neutralize the negative consequences of unfair price competition based on dumping.

On a bilateral basis, trade relations between states are regulated through trade treaties and agreements that are concluded between countries at the executive level (between governments) and are subject to ratification by the legislature (parliaments). They are usually concluded for 5-10 years and are subject to periodic review and renewal by the parties involved.

A trade treaty, an agreement on trade and navigation is a type of interstate agreement that establishes the principles and regime of bilateral trade.

A fundamental principle of international law is that each state has exclusive jurisdiction over its territory and all legal entities and individuals located in that territory are subject to its jurisdiction. Therefore, for the assessment of trade agreements, the issue of fundamental importance is the treatment that is provided to foreign goods, services and capital on the territory of a given state.

In the practice of regulating international trade, the following regimes are most often used:

Most Favored Nation (MFN) treatment is a condition enshrined in international trade agreements, providing for the provision by contracting parties to each other of all rights, advantages and benefits that any third state enjoys and/or will enjoy. The MFN principle is included in the terms of the WTO and is considered the basis for creating a non-discriminatory regime in international trade;
national treatment is a regime of economic relations between states, in which one state provides foreign individuals and legal entities with a treatment no less favorable than for its own legal entities and individuals. Most often, national treatment is used in relations between countries that are members of integration groups and in relation to the export of capital.

There are exceptions from the MFN, but only within the following limits:

exemptions for neighboring countries to facilitate cross-border trade. Such trade represents less than 1% of world trade, and exemptions that apply to it do not have any significant impact on MFN policy as a whole;
exemptions and benefits arising from agreements on the creation of customs unions and free trade zones of several countries. Within the framework of integration groups, up to 40% of international trade is carried out. Countries that have provided certain trade benefits to each other within the framework of such groupings have the right not to extend them to “third countries”. Although this is not considered a violation of the MFN principle under WTO rules, the distorting effect of customs zone agreements on the MFN principle itself is obvious;
exemptions for developing countries under the Generalized System of Preferences (GSP) - a system of customs benefits in force since 1971, provided by developed and transition countries to developing countries in the form of the abolition or significant reduction of tariffs on imports of goods from these countries.

Types of non-tariff methods

The World Trade Organization groups non-tariff barriers into seven groups. The first group includes all operations that are in one way or another related to government intervention. These are restrictions that are influenced by the government through subsidies and subsidies to exporters, or through government orders. The second group includes customs and administrative formalities. Next come special technical trade barriers. These include:

Finished works on a similar topic

Course work World practice of using non-tariff restrictions 450 ₽ Abstract World practice of using non-tariff restrictions 270 ₽ Test work World practice of using non-tariff restrictions 220 ₽

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Environmental standards.
Sanitary standards.
Requirements for packaging and labeling.
Rules and procedure for certification.

There are separate phytosanitary and sanitary standards. Quotas, the introduction of embargoes, exchange control, and export restrictions belong to the group of specific non-tariff measures. Import duties, measures to protect intellectual property, and more may also be introduced.

The UN Trade and Development Division proposes dividing non-tariff measures into technical and non-technical for imports and a separate group of measures for exports. Technical measures include sanitary and phytosanitary measures, various regulations and standards, inspection and customs formalities. Non-technical restrictions on imports may include conditional trade protection measures, various types of licensing, quotas, financial restrictions, maintaining domestic competitiveness, investment in trade, and others.

Exports are subject to restrictions, quotas, licenses, and subsidies. The effectiveness of their work depends on the peculiarities of the functioning of the country’s customs system. The influence is exerted by bureaucracy, the flow of information and its transparency, the consistency of political activity, security, payments, and more.