Across the globe, the use of non-tariff measures has been steadily increasing. Various economies such as USA, China and European Union have long since used non-tariff measures as means to regulate international trade. However, owing to the low level of awareness regarding such measures, their use has been limited predominantly to only certain segments of the industry. This article talks about different forms of non-tariff measures.
Global economies have found non-tariff measures as an effective tool to achieve their goals of trade regulation. Along with the tariff measures, the, governments have now started using non-tariff measures as a measure for restricting the imports. The use of non-tariff measures has increasingly gained popularity as a way to reduce dependency on excessive imports into the country.
What are non-tariff measures?
The United Nations Conference on Trade and Development (UNCTAD) defines non-tariff measures as "as policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both". In simple words, while tariff measures relate to imposition of taxes or duties, non-tariff measures or non-tariff barriers can be understood as trade barriers that are used to restrict imports or exports of goods or services through ways, other than by imposition of taxes/ duties. These comprise all the policy measures other than tariff measures such as anti-dumping duty, countervailing duty or safeguard duties. The non-tariff measures affect price as well as the volume of the traded products.
Commonly used non-tariff measures
The most used non-tariff measures are technical measures, followed by quantity control measures and then the price measures.
Technical measures include measures such as sanitary and phytosanitary measures, licenses, standards and certification.
- Sanitary and Phytosanitary Measures – The WTO Agreement on Sanitary and Phytosanitary Measures provides that the member countries have the right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health. The imposition of SPS acts as a check on the imports by ensuring that they meet the international standards and regulations. For instance, in India the Ministry of Health and Family Welfare has made it mandatory for every package having a mixture of edible oils to have a label immediately below its brand name/trade name on front of pack declaring the name and content of edible vegetable oil1.
- Import licensing – Licensing is one of the most common types of non-tariff measures, wherein the government grants a license to allow a business to import certain types of goods into the country. The WTO Agreement on Import Licensing Procedure defines it as administrative procedures used for the operation of import licensing regimes requiring the submission of an application or other documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory of the importing member. In simpler words, under such measures, imports are not allowed unless the importer has the license to imports. One such instance of introduction of licensing requirements in India was that in the case of Ammonium Nitrate2 in 2012, wherein imports of the product were subject to licensing requirements.
- Standards and certifications – The standards and certifications are to discourage supply of sub- standard material which can pose as a health hazard, security threat, and safety concerns in a market. While the same are to be typically followed by both domestic producers as well exporters (supplying material) in that market, it may restrict imports unless foreign producers and exporters meet the laid down standards. The Indian government has imposed various standards & certification requirements. Recently the Government has been quite aggressive in controlling supply of sub- standard material by the way of imposing mandatory BIS certification/ registration for a number of products including Acetic Acid, Aniline, Boric Acid, Methanol, Poly Aluminium Carbonate and Caustic Soda. It is often noted that imports show a visible, though mostly temporary, decline when BIS Standards are mandated.
Quantity control measures
- Quotas – A quota is a limit in quantitative or value terms that is imposed on the import of a product for a specified period of time. Quotas may be global quotas or with respect to specific countries. Quotas can be imposed unilaterally without negotiations with the exporting country or bilaterally with having negotiations and agreements. They can further be combined with the licensing requirements in order to regulate their flow. The Government may impose quotas, if the same are warranted in public interest. For instance, the Department of Commerce in India had introduced quota restrictions for Urad and Peas.
- Government procurement restrictions – The Government Procurement Restrictions act as barrier to trade by exercising control over purchase of goods by government agencies. If imposed, the government agencies are then mandatorily required to prefer purchasing from domestic suppliers over imports. A well-known instance of such a non-tariff measure is that in the case of iron and steel products where the government has made it mandatory for government undertakings to source a prescribed percentage of their requirement from entities that are registered and established in India.
- Minimum import price – Minimum import price is a temporary measure which acts as check on the imports of goods at low prices. It sets a minimum price below which imports cannot take place. In India, minimum import price restriction has been set for various products in past such as various products peas, granite, certain iron and steel products, etc. One particular instance was when the Ministry of Commerce & Industry3 had made import of pepper at or above Rs.500/- per kg. free and import below Rs.500/- per kg prohibited.
The recent developments on climate change, financial and economic crisis, growing concerns over food safety, have aided in the increase of non-tariff measures. While the primary objective may have been to ensure quality, safety and security, these barriers have no doubt acted as barriers to trade and helped in curbing the flow of imports. On the other side, these measures have an impact on the exporters or importers from least developed nations which may find it difficult to comply with the requirements of some of the technical measures. However, the use of non-tariff measures has continued to grow, and it can be expected that such measures are likely to play a key role in the foreseeable future of international trade.
1. Food Safety and Standards (Packaging And Labelling) Regulations, 2011
2. Ammonium Nitrate Rules, 2012
3. Notification No: 21/2015-2020 of Ministry of Commerce & Industry dated 25th July, 2018
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.