Trade Barriers in International Business

The Presentation is comprehensive list of various tariff and non tariff barriers imposed in International Business.

1. Trade Barriers in International Business By: Himanshu Sood Assistant Professor PCTE Group of Institutes, Ludhiana

2. Trade Barriers (Instruments of Trade Policy) Trade Barriers classified in two forms: Tariff Barriers and Non Tariff Barriers Tariff: In simplest terms, a tariff is a tax. It adds to the cost of imported goods and is one of several trade policies that a country can enact. Also known as custom duties. Reasons: Protecting Employment. Protecting Consumer. Infant Industry Protection. National Security. Retaliation. Generating Government Treasure

3. Types of Tariff Barriers Specific Tariff: A fixed fee levied on one unit of an imported good is referred to as a specific tariff. This tariff can vary according to the type of good imported. For example, a country could levy a $15 tariff on each pair of shoes imported, but levy a $300 tariff on each computer imported. Earlier custom duty on gold was Rs 300 per 10 gms . Also depend upon the weight of commodity like USD 10 for 10,000 Kgs of Wheat.

4. Types of Tariff Barriers Ad Valorem Tariffs  The phrase  ad valorem  is Latin for "according to value“. Based upon %age of goods value. An example of an ad valorem tariff would be a 15% tariff levied by Japan on U.S. automobiles. The 15% is a price increase on the value of the automobile, so a $10,000 vehicle now costs $11,500 to Japanese consumers. If the price of car would increased to USD 20,000 then the value in Japanese market would also increase to USD 23,000. Now a days custom duty of 2% is imposed on 10 gms value of gold in India.

5. Types of Tariff Barriers Compound Duty: Combination of Specific duty and Ad Valorem duty is called Compound duty or Mixed duty. Out of total import of 10000 units of watches, the custom duty 2000 Units of Watch with value less than USD 150 would be under specific duty of USD 10 per watch and rest 8000 or above USD 150 value would be charged 10% of the value per unit of watch.

6. Variable Levy A duty that guarantee, the market price of imports would be same as of produced in domestic market.

7. Non Tariff Barriers All forms of discrimination against imports other than import duties. Qualitative Restrictions and used by developed economies. Only Quotas are quantitative. The loss revenue resulting to barrier of trade is known as economic loss.

8. Types of Non Tariff duties Quotas: Numerical limits for specific kind of good that a country will permit to be imported without restriction during a specified time. Ex: EU allowed tariff free quotas on importation of Bananas from Caribbean and African Countries on 7,75,000 tons of bananas and after crossing this limit, tariff of Euro 176 per ton of tariff would be charged.

9. Types of Non Tariff duties VER (Voluntary Export Restraint): When Exporter voluntarily make a restriction on the quantity of exports. This can be in two ways: - Either on request of importer to protect his domestic industry or - Via pressure by importing country. Japan imposed a VER on its auto exports into the U.S. as a result of American pressure in the 1980s. The VER subsequently  gave the U.S. auto industry some protection against a flood of foreign competition. By creating a manufacturing set up in foreign country, the exporting country can overcome this barrier.

10. Types of Non Tariff duties Government procurement policies: Here government is making policies favorable to domestic country. Tax holidays to specific industries to be competitive in market. Customs and other Administrative Procedures: Chinese govt is charging different rate of duties entering through different ports. Japan change its custom procedures very frequently.

11. Types of Non Tariff duties Standards: Whether Indian companies are following ISO 9000 or ISO 14000 system. MDH Salmonella Contamination. Haldiram’s Snacks banned in US Heinz’s Formula 1 banned in China GRB Diary’s banned by USFDA because of insufficient content. Canada banned Chayawanprash being high on mercury and lead in 2005. Canadian regulation treat calcium enriched orange juices as drugs and demand special production approval procedure for exporters. Local content Requirement

12. Types of Non Tariff duties Dabur and Patanjali Honey with Antibiotics – banned in Switzerland and Australia. Lifebuoy used for cleaning animal skin. Red Bull banned in France, Denmark and Lithuania. Heart problems and hyper tension. Milk and allied products from China was banned from time to time since 2008. (Melamine Content)

13. Types of Non Tariff duties ISF form requisition by USA government. Packaging requirement by Australian government. Non usage of Ozone depleting substance by Italian government.

14. Thank You