Professional Documents
Culture Documents
PGDIB - I
Trade Barriers
Trade Barriers can be classified as:
Tariff Barriers
Non – Tariff Barriers
Currency control
Administration delay
Tariff Barriers
Tariffs are the taxes on the goods
that is traded internationally.
Tariff Barriers can be classified as:
Specific duty
Ad Valorem duty
Compound duty
Countervailing duty
Tariff Barriers
Specific duty:
It refers to the duty based on the value of
goods. It is calculated on per unit basis.
Ex: Rs. 2 tax on 1 kg Sugar.
Ad Valorem duty:
It is the duty based on the value of the
goods. It is calculated on the basis of
percentage of value of good.
Ex: 5% tax on whatever volume purchased
Tariff Barriers
Compound duty:
When both type of tariffs are charged on
the same product, it is known as
compound duty.
It is based on both the unit and the value
of the product.
Countervailing duty:
It refers to cancel out the impact of
unfair business practices, such as
subsidy.
Non - Tariff Barriers
Barriers influencing Prices :
Customs Valuation
Subsidies
Special Fee
Barriers influencing Quantity :
Quota
Embargo
Technical Barriers
Customs Valuation
Custom officials use a great deal of
carefulness in valuing imported
products.
Higher the value of the product,
the greater the duty imposed on it
& vice-versa.
Ex: Semi manufactured goods face
lower rate of duty than
manufactured goods.
Subsidies
Subsidy is the benefits provided by
importing government to the
domestic producers so as to
reduce the production cost and
thus the price of that good.
The provision of subsidy depends
upon the budgetary resources.
Ex: Cash grants, Low-interest
rates, Tax advantage etc.
Special Fee
Special is a kind of fee charged by
the custom officials/authorities for
custom clearance.
The greater the custom fee, the
larger the value of imported good
and more restricted its import will
be.
Quota
It is the direct restriction on the
quantity of some good that may be
imported into a country.
The importing country prescribes
specific quantum beyond which a
commodity cannot be imported in
a particular year.
Embargo
Embargo is an official ban on the
trade with a particular country.
Due to strained political relation, a
country imposes embargo on
imports from a particular country,
which normally includes all
commodities.
Ex: UN imposing an embargo on
imports from Haiti in 1993.
Technical Barriers
Technical Barriers can be classified as:
Product & Testing standards:
It requires foreign government to meet a
country’s product/ testing standards before
they are offered for sale in that country.
Ex: size, shape, design, performance, labeling,
packaging, processes, etc.
Indian Exports face lot of such barriers for
export of Rice, Yarn, Meat, Pharmaceuticals,
etc.
Technical Barriers
“Buy local” legislation:
Under this at least Government
departments are forbidden to use
imported goods.
Import license:
Some countries have a legislation
ensuring that a particular commodity can
be imported only using import license.
Technical Barriers
Counter Trade:
Under counter trade some countries import goods
only in exchange for their own products.
In such cases, the value of their imports are
limited to the value of their exports.
It is the bilateral trade where one set of goods is
exchanged for another set of goods.
It is an alternative means of carrying out an
international transaction when conventional
means of payment are difficult, or not possible.
Technical Barriers
Voluntary Export Restrain:
It is the voluntary restrain by the exporting
country on the exports of a specified
product to help the importing country to
protect its domestic industry.
Ex: Limitation on auto exports to the US
enforced by Japanese automobile producers
in 1981.
References
International Business
By V. sharan