1 | P a g e

PROJECT ON TRADE BLOCS AND TRADE

BARRIERS

2 | P a g e

INDEX

CHAPTER

NO.

TITLE

PAGE

NO.

1. General Introduction

Introduction of trading blocs 3

Objectives of trading blocs 4

Types of trading blocs 13-18

Regional trade blocs,tariff and trade barriers 6-12

Advantages and disadvantages

The European union (EU) 25

2. TRADE BARRIERS

Introduction to trade barriers 26-29

Types of tariffs and trade barriers 30-36

Trends in tariff and non tariffs barriers 37

Tariff reduction and the growth international

trade

38-39

Trade freedom 40

Trade problems for developing countries 41

Export subsidy and trade 42

Findings 43

Conclusion 44

Bibliography

45

3 | P a g e

INTRODUCTION TO TRADE BLOCS

A trade bloc is a type of intergovernmental agreement, often part of a

regional intergovernmental organization, where regional barriers to trade, (tariffs and non-

tariff barriers) are reduced or eliminated among the participating states.

Historic economic blocs include the Hanseatic League, a trading alliance in northern Europe

in existence between the 13th and 17th centuries and the German Customs Union (Zollverein)

initiated in 1834, formed on the basis of the German Confederation and subsequentlyGerman

Empire from 1871. Surges of trade bloc formation were seen in the 1960s and 1970s, as well

as in the 1990s after the collapse of Communism. By 1997, more than 50% of all world

commerce was conducted within regional trade blocs. Economist Jeffrey J. Scott of

the Peterson Institute for International Economics notes that members of successful trade

blocs usually share four common traits: similar levels of per capita GNP, geographic

proximity, similar or compatible trading regimes, and political commitment to regional

organization.[3]

Advocates of worldwide free trade are generally opposed to trading blocs, which, they argue,

encourage regional as opposed to global free trade. Scholars and economists continue to

debate whether regional trade blocs are leading to a more fragmented world economy or

encouraging the extension of the existing global multilateral trading system.

Trade blocs can be stand-alone agreements between several states (such as the North

American Free Trade Agreement (NAFTA)) or part of a regional organization (such as

theEuropean Union). Depending on the level of economic integration, trade blocs can fall

into different categories, such aspreferential trading areas, free trade areas, customs

unions, common markets and economic and monetary unions.

4 | P a g e

OBJECTIVES OF TRADING BLOCS

A bloc means groups. Trading blocs means grouping of countries. It means a group of nations

united for some common actions. Trading bloc is a voluntary grouping of countries of a

specific region for common benefit.

It indicates regional economic integration of nations for mutual benefits. In general terms,

regional trade blocks are associations of nations to promote trade within the block and defend

its members against global competition.

Trading blocs are highly organised and based on shared interest to promote economic and

social interest of the member countries.

There are different types of trading blocs such as Free Trade Area, Customs union, Economic

Union, custom union, political union, common market etc. trading blocs leads to greater

international bargaining power, increased competition between members, rapid spread of

technology etc. Lowering trade barriers is one of the most obvious means of encouraging

trade.

Objectives of Trading Blocs:

i. To remove trade restrictions among member nations.

ii. To improve social, political, economic and cultural relations among member nations.

iii. To encourage free transfer of resources.

iv. To establish collective bargaining.

v. To promote economic growth.

i. SAARC:

It stands for South Asian Association for Regional Cooperation. SAARC is an economic

integration of South Asian countries for regional cooperation. It was established on

8th December 1985.

5 | P a g e

It consists of nations of South Asia that includes Bangladesh, Bhutan, India, Maldives, Nepal,

Pakistan and Srilanka. SAARC focus on areas such as Science and Technology, agricultural

and rural development, tele-communication, postal services etc.

SAARC members signed an agreement called SAPTA (South Asian Preferential Trade

Agreement). This agreement was signed to provide a framework for the exchange of trade

concessions.

It aims at accelerating the process of economic and social development in member states.

Afghanistan became the eighth member of this group in 2007.

ii. OPEC: Oil and Petroleum exporting countries:

Opec is an organisation consisting of world's oil and petroleum exporting countries. The

Organization of the Petroleum Exporting Countries (OPEC) was created in 1960 to unify and

protect the interests of oil-producing countries. OPEC has maintained its headquarters in

Vienna since 1965.

The original members of OPEC included Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.

OPEC has since expanded to include seven more countries (Algeria, Angola, Indonesia,

Libya, Nigeria, Qatar, and United Arab Emirates) making a total membership of 12.

The main objective of this bloc is to unify and coordinate member countries petroleum

policies and to provide them with technical and economic aid. There has been a continuous

increase in India's share of export to opec countries.

iii. EU - European Union:

European Union is considered as one of the powerful trading bloc in the world. It was

brought into existence in 1st January 1958 by the treaty of Rome. France, Western Germany,

Italy, Belgium, Netherland and Luxemburg were the founder members of European Union.

Initially it was known as European Economic Community (EEC).

It has a common currency called 'EURO'. It also offers tremendous trade opportunities for

non-European firms. At present there are twenty seven members in this bloc that includes:

Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France,

Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the

6 | P a g e

Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United

Kingdom.

iv. NAFTA:

North American Free Trade Agreement the North American Free Trade Agreement or

NAFTA is an agreement signed by the governments of the United States, Canada, and

Mexico creating a trilateral trade bloc in North America.

The agreement came into force on January 1,1994 NAFTA is the most powerful trading blocs

in the world. USA, Canada, Mexico are the members of NAFTA. The objective of NAFTA is

to reduce barriers on the flow of goods, services and people among member nations,

protection to investment in member countries etc. European Union and NAFTA accounts for

over fifty percent of the world trade.

7 | P a g e

8 | P a g e

Advantages and Disadvantages of trade blocs

There are five major advantages of trade bloc agreements: foreign direct investment,

economies of scale, competition, trade effects, and market efficiency.

Foreign Direct Investment: An increase in foreign direct investment results from trade blocs

and benefits the economies of participating nations. Larger markets are created, resulting in

lower costs to manufacture products locally.

Economies of Scale: The larger markets created via trading blocs permit economies of scale.

The average cost of production is decreased because mass production is allowed.

Competition: Trade blocs bring manufacturers in numerous countries closer together,

resulting in greater competition. Accordingly, the increased competition promotes greater

efficiency within firms.

Trade Effects Trade blocs eliminate tariffs, thus driving the cost of imports down. As a

result, demand changes and consumers make purchases based on the lowest prices, allowing

firms with a competitive advantage in production to thrive.

Market Efficiency: The increased consumption experienced with changes in demand

combines with a greater amount of products being manufactured to result in an efficient

market. The disadvantages, on the other hand, include: regionalism vs. multinationalism, loss

of sovereignty, concessions, and interdependence.

Regionalism vs. Multinationalism: Trading blocs bear an inherent bias in favor of their

participating countries. For example, NAFTA, a free trade agreement between the United

States, Canada and Mexico, has contributed to an increased flow of trade among these three

countries. Trade among NAFTA partners has risen to more than 80 percent of Mexican and

Canadian trade and more than a third of U.S. trade, according to a 2009 report by the Council

on Foreign Relations. However, regional economies by establishing tariffs and quotas that

protect intra-regional trade from outside forces, according to the University of California

Atlas of Global Inequality. Rather than pursuing a global trading regime within theWorld

Trade Organization, which includes the majority of the world's countries, regional trade bloc

countries contribute to regionalism rather than global integration.

Loss of Sovereignty: A trading bloc, particularly when it is coupled with a political union, is

likely to lead to at least partial loss of sovereignty for its participants. For example, the

9 | P a g e

European Union, started as a trading bloc in 1957 by the Treaty of Rome, has transformed

itself into a far-reaching political organization that deals not only with trade matters, but also

with human rights, consumer protection, greenhouse gas emissions and other issues only

marginally related to trade.

Concessions: No country wants to let foreign firms gain domestic market share at the

expense of local companies without getting something in return. Any country that wants to

join a trading bloc must be prepared to make concessions. For example, in trading blocs that

involve developed and developing countries, such as bilateral agreements between the U.S. or

the EU and relatively poor Asian, Latin American or African countries, the latter may have to

allow multinational corporations to enter their home markets, making some local firms

uncompetitive.

Interdependence: Because trading blocs increase trade among participating countries, the

countries become increasingly dependent on each other. A disruption of trade within a trading

bloc as a result of a natural disaster, conflict or revolution may have severe consequences for

the economies of all participating countries.

10 | P a g e

REGIONAL TRADE BLOCKS, TARIFFS AND TRADE BARRIERS

The Internet and technological advances in telecommunications link trade partners across the

globe.

Yet, this does not mean that trade barriers are non-existent. While the World Trade

Organization (WTO)

promotes global multilateral free trade, regional trade blocks provide their members with the

mechanisms for

competing in an aggressive global market.

Regardless of the size of your business, it is essential to know the international trade

regulations that govern

your import and/or export operations. This article provides a brief description of each trade

block – date

established, list of members, goals, population, and GDP (PPP). Links are provided for

more detailed

information of trade agreements and tariffs.

REGIONAL TRADE BLOCKS

In general terms, regional trade blocks are associations of nations at a governmental level to

promote trade

within the block and defend its members against global competition. Defense against global

competition is

obtained through established tariffs on goods produced by member states, import quotas,

government subsidies,

onerous bureaucratic import processes, and technical and other non-tariff barriers.

Since trade is not an isolated activity, member states within regional blocks also cooperate in

economic, political,

11 | P a g e

security, climatic, and other issues affecting the region.

In terms of their size and trade value, there are four major trade blocks and a larger number of

blocks of regional

importance.

The four major regional trade blocks are, as follows:

asean

ASEAN (Association of Southeast Asian Nations) Updated 22 Jan 2014

Established on August 8, 1967, in Bangkok/Thailand.

Member States: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar,

Philippines, Singapore, Thailand, and Vietnam.

For a map of the region, click here.

Goals: (1) Accelerate economic growth, social progress and cultural development in the

region and (2) Promote

regional peace and stability and adhere to United Nations Charter.

Important Indicators for 2012: Population 616.6 million; GDP US$3.751 trillion; and Total

Trade US$2.474 trillion.

(Figures as at 21 October 2013, ASEAN Website.)

ASEAN Economic Community (AEC): Learn more about ASEAN Leaders' vision to

transform ASEAN into a

single market and production base that is highly competitive and fully integrated into the

global ecomony by 2015.

News: For ASEAN statements and communiques, click here.

Calendar of Official Meetings 2014

EU (European Union) Updated 22 Jan 2014

Founded in 1951 by six neighboring states as the European Coal and Steel Community

(ECSC).

Over time evolved into the European Economic Community, then the European Community

12 | P a g e

and,

in 1992, was finally transformed into the European Union.

Regional block with the largest number of members states (28). These include Austria,

Belgium,

Bulgaria, Croatia (2013), Cyprus, Czech Republic, Denmark, Estonia, Finland, France,

E U

Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland,

Portugal, Romania,

Slovakia, Slovenia, Spain, Sweden, The Netherlands, and the United Kingdom.

For a map of the Union, click here.

Goals: Evolved from a regional free-trade association of states into a union of political,

economic and executive

connections.

Population estimated at 505.7 million (January 2013 est., Eurostat).

GDP (PPP) estimated at US$15.54 trillion (2012 est., CIA World Factbook 7 January 2014).

Check Out: Directory of European Union Legislation for treaties, international

agreements, legislation in

force and other related issues.

For up-to-date trade news: Visit EurActiv – an independent media portal fully dedicated to

EU affairs.

EU-US Free Trade Alliance: For updates on negotiations of the Transatlantic Trade and

Investment

Partnership (TTIP) between the EU and the USA, see EU-US trade talks: moving forward?

MERCOSUR (Mercado Comun del Cono Sul - Southern Cone Common Market)

Official site is available only in Spanish and Portuguese. Updated 23 Jan 2014

Established on 26 March 1991 with the Treaty of Assunción.

Full members include Argentina, Brazil, Paraguay, Uruguay, and Venezuela. Boliivia is

undergoing process of becoming a full member. Associate members include Chile,

Colombia, Ecuador, Guyana, Peru, and Suriname. Associate members have access to

13 | P a g e

MERCOSUR

MERCOSUL

preferential trade but not to tariff benefits of full members. Mexico, interested in becoming a

member of the

region, has an observer status.

For a map of the region, click here.

Goals: Integration of member states for acceleration of sustained economic development

based on social

justice, environmental protection, and combating poverty.

Population: More than 282 million people (July 2013 est., CIA World Factbook)

GDP (PPP) of more than US$3.471 trillion (2011 est., World Economic Outlook Database,

IMF, April 2012).

News: Visit MercoPress – an independent news agency operating from Montevideo,

Uruguay, the

administrative headquarters of Mercosur, that focuses on news from member states.

NAFTA

NAFTA (North American Free Trade Agreement) Updated 27 Jan 2014

Agreement signed on 1 January 1994.

Members: Canada, Mexico, and the United States of America.

Click here for map of the region.

Goals: Eliminate trade barriers among member states, promote conditions for free trade,

increase investment opportunities, and protect intellectual property rights.

Population of over 469.8 million (July 2013 est., The CIA Factbook, 14 January 2014).

GDP (PPP) US$17.8 trillion (July 2012 est., The CIA Factbook, 5 February 2013).

Check Out: Legal texts [https://www.nafta-sec-

alena.org/Default.aspx?tabid=87&language=en-US]

Agreement, Rules of Procedures, Code of Conduct, and Procedural Forms.

What's New? [https://www.nafta-sec-alena.org/Default.aspx?tabid=92&language=en-US]

14 | P a g e

Publication of recent decisions made.

Benefits for US companies and export procedures.

Other regional trade blocks, regional economic partnerships and free trade associations

include the following:

ANDEAN (Andean Community Countries) – Bolivia, Colombia, Ecuador, and Peru.

Associate Members: Argentina, Brazil, Chile, Paraguay, and Uruguay.

Observer Countries: Mexico and Panama.

BSEC (Organization of the Black Sea Economic Cooperation) – Albania, Armenia,

Azerbaijan, Bulgaria,

Georgia, Hellenic Republic, Moldova, Romania, Russian Federation, Serbia, Turkey, and

Ukraine.

CARICOM (Caribbean Community) – Antigua & Barbuda, The Bahamas, Barbados,

Belize, Dominica,

Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts & Nevis, Saint Lucia, Saint Vincent

& The Grenadines,

Surinam, and Trinidad & Tobago.

Check out: Caribbean Community (CARICOM) - Very Useful Websites for Trade and

Investment.

CIS (Commonwealth of Independent States)

Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyz, Moldova, Russia, Tajikistan,

Turkmenistan, Ukraine, and

Uzbekistan.

For statistics and other information (in English), visit the Interstate Statistical

Committee of the CIS.

COMESA (Common Market for Eastern and Southern Africa)

Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia,

15 | P a g e

Kenya, Libya,

Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia,

Zimbabwe.

ECOWAS (Economic Community of West African States)

Benin, Burkina Faso, Cape Verde, The Gambia, Ghana, Guinea, Guinea Bissau, Ivory Coast,

Liberia, Mali,

Niger, Nigeria, Senegal, Sierra Leone, and Togo.

Eurasian Economic Union Added 29 May 2014

Economic and trade treaty signed on 29 May 2014 between Russia and its ex-Soviet

neighbors, Kazakhstan

and Belarus. If approved by the parliament of each member state, the new economic union

will enter into force

on 1 January 2015.

EFTA (European Free Trade Association) – Iceland, Liechtenstein, Norway, and

Switzerland.

GAFTA (Greater Arab Free Trade Area) - Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait,

Lebanon, Libya,

Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates

(UAE), and Yemen.

(Website not found. See latest news.)

GCC (Gulf Cooperation Council for the Arab States of the Gulf) – Bahrain, Kuwait,

Oman, Qatar, Saudi

Arabia, and the United Arab Emirates (UAE).

MEFTA (Middle East Free Trade Area)

Countries which have signed Free Trade Agreements (FTAs), Trade and Investment

Framework Agreements

(TIFAs), or receive active U.S. support for WTO accession include Algeria, Bahrain, Egypt,

Iraq, Israel, Jordan,

16 | P a g e

Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, United Arab Emirates, and

Yemen.

Pacific Community – comprised of the 22 Pacific island countries and territories of

American Samoa, Cook

Islands, Fiji Islands, French Polynesia, Guam, Kiribati, Marshall Islands, Micronesia, Nauru,

New Caledonia,

Niue, Northern Mariana Islands, Palau, Papua New Guinea, Pitcairn Islands, Samoa,

Solomon Islands, Tokelau,

Tonga, Tuvalu, Vanuatu, Wallis and Futuna, and the founding countries of Australia, France,

New Zealand and

the United States of America.

SAARC (South Asian Association for Regional Cooperation)

Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.

SADC (Southern Africa Development Community)

Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi,

Mauritius, Mozambique,

Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.

17 | P a g e

TYPES OF TRADING BLOCS

A regional trading bloc is a group of countries within a geographical region that protect

themselves from imports from non-members. Trading blocs are a form of economic

integration, and increasingly shape the pattern of world trade. There are several types of

trading bloc:

Preferential Trade Area

Preferential Trade Areas (PTAs) exist when countries within a geographical region agree to

reduce or eliminate tariffbarriers on selected goods imported from other members of the area.

This is often the first small step towards the creation of a trading bloc.

Free Trade Area

Free Trade Areas (FTAs) are created when two or more countries in a region agree to reduce

or eliminate barriers to trade on all goods coming from other members.

Customs Union

A customs union involves the removal of tariff barriers between members, plus the

acceptance of a common (unified) external tariff against non-members. This means that

members may negotiate as a single bloc with 3rd parties, such as with other trading blocs, or

with the WTO.

Common Market

A ‘common market’ is the first significant step towards full economic integration, and occurs

when member countries trade freely in all economic resources – not just tangible goods. This

means that all barriers to trade in goods, services, capital, and labour are removed. In

addition, as well as removing tariffs, non-tariff barriers are also reduced and eliminated. For a

common market to be successful there must also be a significant level of harmonisation of

micro-economic policies, and common rules regarding monopoly power and other anti-

competitive practices.

18 | P a g e

The European Union (EU)

The EU is the world’s largest trading bloc, and second largest economy, after the USA.

The EU was originally called the Economic Community (Common Market, or The Six) after

its formation following theTreaty of Rome in 1957. The original six members were

Germany, France, Italy, Belgium, Netherlands, and Luxembourg.

The initial aim was to create a single market for goods, services, capital, and labour by

eliminating barriers to trade and promoting free trade between members.

In terms of dealing with non-members, common tariff barriers were erected against cheap

imports, such as those from Japan, whose goods prices were artificially low because of the

undervalued yen.

By 2014, following continuous enlargement, the EU had 28 members. Croatia is the latest

country to join, in July 2013.

Austria Germany Norway

Belgium Greece Poland

Bulgaria Ireland Portugal

Cyprus Italy Romania

Croatia Latvia Spain

Czech Republic Lithuania Slovenia

Denmark Luxembourg Slovakia

Estonia Malta Sweden

Finland Netherlands UK

19 | P a g e

France

The main advantages for members of trading blocs

Free trade within the bloc

Knowing that they have free access to each other's markets, members are encouraged to

specialise. This means that, at the regional level, there is a wider application of the principle

of comparative advantage.

Market access and trade creation

Easier access to each other’s markets means that trade between members is likely to

increase. Trade creation exists when free trade enables high cost domestic producers to be

replaced by lower cost, and more efficient imports. Because low cost imports lead to lower

priced imports, there is a 'consumption effect', with increased demand resulting from lower

prices.

See: Trade creation and trade diversion

he main disadvantages of trading blocs

Loss of benefits

The benefits of free trade between countries in different blocs is lost.

Distortion of trade

Trading blocs are likely to distort world trade, and reduce the beneficial effects of

specialisation and the exploitation ofcomparative advantage.

Inefficiencies and trade diversion

Inefficient producers within the bloc can be protected from more efficient ones outside the

bloc. For example, inefficient European farmers may be protected from low-cost imports

20 | P a g e

from developing countries. Trade diversion arises when trade is diverted away from efficient

producers who are based outside the trading area.

See: Trade creation and trade diversion.

See: EU Sugar Case

Retaliation

The development of one regional trading bloc is likely to stimulate the development of

others. This can lead to trade disputes, such as those between the EU and NAFTA, including

the recent Boeing (US)/Airbus (EU) dispute. The EU and US have a long history of trade

disputes, including the dispute over US steel tariffs, which were declared illegal by

the WTOin 2005. In addition, there are the so-called beef wars with the US applying £60m

tariffs on EU beef in response to the EU’s ban on US beef treated with hormones;

and complaintsto the WTO of each other’s generous agricultural support.

TYPES OF TRADING BLOCS

A regional trading bloc is a group of countries within a geographical region that protect

themselves from imports from non-members. Trading blocs are a form of economic

integration, and increasingly shape the pattern of world trade. There are several types of

trading bloc:

Preferential Trade Area

Preferential Trade Areas (PTAs) exist when countries within a geographical region agree to

reduce or eliminate tariffbarriers on selected goods imported from other members of the area.

This is often the first small step towards the creation of a trading bloc.

Free Trade Area

21 | P a g e

Free Trade Areas (FTAs) are created when two or more countries in a region agree to reduce

or eliminate barriers to trade on all goods coming from other members.

Customs Union

A customs union involves the removal of tariff barriers between members, plus the

acceptance of a common (unified) external tariff against non-members. This means that

members may negotiate as a single bloc with 3rd parties, such as with other trading blocs, or

with the WTO.

Common Market

A ‘common market’ is the first significant step towards full economic integration, and occurs

when member countries trade freely in all economic resources – not just tangible goods. This

means that all barriers to trade in goods, services, capital, and labour are removed. In

addition, as well as removing tariffs, non-tariff barriers are also reduced and eliminated. For a

common market to be successful there must also be a significant level of harmonisation of

micro-economic policies, and common rules regarding monopoly power and other anti-

competitive practices. There may also be common policies affecting key industries, such as

theCommon Agricultural Policy (CAP) and Common Fisheries Policy (CFP) of the

European Single Market (ESM).

The European Union (EU)

The EU is the world’s largest trading bloc, and second largest economy, after the USA.

The EU was originally called the Economic Community (Common Market, or The Six) after

its formation following theTreaty of Rome in 1957. The original six members were

Germany, France, Italy, Belgium, Netherlands, and Luxembourg.

The initial aim was to create a single market for goods, services, capital, and labour by

eliminating barriers to trade and promoting free trade between members.

In terms of dealing with non-members, common tariff barriers were erected against cheap

imports, such as those from Japan, whose goods prices were artificially low because of the

undervalued yen.

22 | P a g e

By 2014, following continuous enlargement, the EU had 28 members. Croatia is the latest

country to join, in July 2013.

Austria Germany Norway

Belgium Greece Poland

Bulgaria Ireland Portugal

Cyprus Italy Romania

Croatia Latvia Spain

Czech Republic Lithuania Slovenia

Denmark Luxembourg Slovakia

Estonia Malta Sweden

Finland Netherlands UK

France

The main advantages for members of trading blocs

Free trade within the bloc

Knowing that they have free access to each other's markets, members are encouraged to

specialise. This means that, at the regional level, there is a wider application of the principle

of comparative advantage.

Market access and trade creation

Easier access to each other’s markets means that trade between members is likely to

increase. Trade creation exists when free trade enables high cost domestic producers to be

23 | P a g e

replaced by lower cost, and more efficient imports. Because low cost imports lead to lower

priced imports, there is a 'consumption effect', with increased demand resulting from lower

prices.

See: Trade creation and trade diversion

Economies of scale

Producers can benefit from the application of scale economies, which will lead to lower costs

and lower prices for consumers.

Jobs

Jobs may be created as a consequence of increased trade between member economies.

Firms inside the bloc are protected from cheaper imports from outside, such as the protection

of the EU shoe industry from cheap imports from China and Vietnam.

The main disadvantages of trading blocs

Loss of benefits

The benefits of free trade between countries in different blocs is lost.

Distortion of trade

Trading blocs are likely to distort world trade, and reduce the beneficial effects of

specialisation and the exploitation ofcomparative advantage.

Inefficiencies and trade diversion

Inefficient producers within the bloc can be protected from more efficient ones outside the

bloc. For example, inefficient European farmers may be protected from low-cost imports

from developing countries. Trade diversion arises when trade is diverted away from efficient

producers who are based outside the trading area.

See: Trade creation and trade diversion.

24 | P a g e

See: EU Sugar Case

Retaliation

The development of one regional trading bloc is likely to stimulate the development of

others. This can lead to trade disputes, such as those between the EU and NAFTA, including

the recent Boeing (US)/Airbus (EU) dispute. The EU and US have a long history of trade

disputes, including the dispute over US steel tariffs, which were declared illegal by

the WTOin 2005. In addition, there are the so-called beef wars with the US applying £60m

tariffs on EU beef in response to the EU’s ban on US beef treated with hormones;

and complaintsto the WTO of each other’s generous agricultural support.

25 | P a g e

INRODUCTION TO TRADE BARRIES

Trade barriers are government-induced restrictions on international trade.[1] The barriers

can take many forms, including the following:

Tariffs

Non-tariff barriers to trade

Import licenses

Export licenses

Import quotas

Subsidies

Voluntary Export Restraints

Local content requirements

Embargo

Currency devaluation[2]

Trade restriction

Most trade barriers work on the same principle: the imposition of some sort of cost on trade

that raises the price of the traded products. If two or more nations repeatedly use trade

barriers against each other, then a trade war results.

Economists generally agree that trade barriers are detrimental and decrease overall economic

efficiency, this can be explained by the theory of comparative advantage. In theory, free

tradeinvolves the removal of all such barriers, except perhaps those considered necessary for

health or national security. In practice, however, even those countries promoting free trade

heavily subsidize certain industries, such as agriculture and steel.

Trade barriers are often criticized for the effect they have on the developing world. Because

rich-country players call most of the shots and set trade policies, goods such as crops that

developing countries are best at producing still face high barriers. Trade barriers such as taxes

on food imports or subsidies for farmers in developed economies lead to overproduction and

dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs

also tend to be anti-poor, with low rates for raw commodities and high rates for labor-

intensive processed goods. The Commitment to Development Index measures the effect that

rich country trade policies actually have on the developing world.

26 | P a g e

Another negative aspect of trade barriers is that it would cause a limited choice of products

and would therefore force customers to pay higher prices and accept inferior quality. Trade

barriers may occur in international trade when goods have to cross political boundaries. A

trade barrier is a restriction on what would otherwise be free trade. The most common form

of trade barriers are tariffs, or duties (the two words are often used interchangeably in the

context of international trade), which are usually imposed on imports. There is also a

category of nontariff barriers, also known as nontariff measures, which also serve to restrict

global trade.

There are several different types of duties or tariffs. An export duty is a tax levied on goods

leaving a country, while an import duty is charged on goods entering a country. A duty or

tariff may be categorized according to how it is calculated. An ad valorem tariff is one that is

calculated as a percentage of the value of the goods being imported or exported. For example,

a 20 percent ad valorem duty means that a duty equal to 20 percent of the value of the goods

in question must be paid. Duties that are calculated in other ways include a specific duty,

which is based on the quantity, weight, or volume of goods, and a compound duty (also

known as a mixed tariff), which is calculated as a combination of an ad valorem duty and a

specific duty.

Duties and tariffs are also categorized according to their function or purpose. An antidumping

duty is imposed on imports that are priced below fair market value and that would damage

domestic producers. Antidumping duties are also called punitive tariffs. A countervailing

duty, another type of punitive tariff, is levied after there has been substantial or material

damage done to domestic producers. A countervailing duty is specifically charged on imports

that have been subsidized by the exporting country's government. The purpose of a

countervailing duty is to offset the subsidy and increase the domestic price of the imported

product.

27 | P a g e

A prohibitive tariff, also known as an exclusionary tariff, is designed to substantially reduce

or stop altogether the importation of a particular product or commodity. It is typically used

when the amount of an imported good exceeds a certain permitted level. It may be used to

protect domestic producers. Another type of tariff is the end-use tariff, which is based on the

use of an imported product. For example, the same product may be charged a different duty if

it is intended for educational use as opposed to commercial use.

In addition to duties and tariffs, there are also nontariff barriers (NTBs) to international trade.

These include quantitative restrictions, or quotas, that may be imposed by one country or as

the result of agreements between two or more countries. Examples of quantitative restrictions

include international commodity agreements, voluntary export restraints, and orderly

marketing arrangements.

Administrative regulations constitute a second category of NTBs. These include a variety of

requirements that must be met in order for trade to occur, including fees, licenses, permits,

domestic content requirements, financial bonds and deposits, and government procurement

practices. The third type of NTB covers technical regulations that apply to such areas as

packaging, labeling, safety standards, and multilingual requirements.

In 1980 the Agreement on Technical Barriers to Trade, also known as the Standards Code,

came into effect for the purpose of ensuring that administrative and technical practices do not

act as trade barriers. By the end of 1988 the agreement had been signed by 39 countries.

Additional work on promoting unified standards to eliminate these NTBs was conducted by

the General Agreement on Tariffs and Trade (GATT) Standards Committee, which in 1994

was succeeded by the newly created World Trade Organization (WTO). As a result more than

131 governments accepted the provisions of the Technical Barriers to Trade (TBT)

Agreement enforced by the WTO.

28 | P a g e

Standards and testing practices can become technical barriers to trade when they are

developed by national or regional interests and then imposed on the international trading.

The U.S. Department of Commerce' s 1998 report, "National Export Strategy," identified "the

global manipulation of international standards and testing practices by governments and

regional economic blocs" as a major threat to U.S. competitiveness abroad. Under the TBT

Agreement the WTO is supposed to guarantee due process and transparency in the

establishment of international standards. The Department of Commerce, however, has

presented examples where narrow regional or market interests have resulted in standards

forced on international trade, and governments and regional economic blocs such as

the European Union (EU) have openly used standards and related practices to achieve market

domination. The United States was among those countries calling for technology- and trade

neutral standards, especially for markets in Latin America and Asia.

Other types of existing technical trade barriers include environmental, health, and safety

certification requirements. In Europe such requirements range from banning imported beef

from cattle raised with hormones to not allowing older airplanes to land because of noise

pollution concerns.

29 | P a g e

Types of Tariffs and Trade Barriers

There are several types of tariffs and barriers that a government can employ:

Specific tariffs

Ad valorem tariffs

Licenses

Import quotas

Voluntary export restraints

Local content requirements

SpecificTariffs

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.

Ad Valorem Tariffs

The phrase ad valorem is Latin for "according to value", and this type of tariff is levied on a

good based on a percentage of that good's 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. This price

increase protects domestic producers from being undercut, but also keeps prices artificially

high for Japanese car shoppers.

30 | P a g e

TARIFF AND NON TARIFF BARRIERS

Tariffs include any schedule of duties imposed on goods passing through

national frontiers. They may be

i. Import duties imposed on goods imported into the country

ii. Exports duties imposed on goods originating from the duty levying

country and exported to other countries.

iii. Transit duties levied on goods crossing the national frontiers,

originating from abroad and meant for some other country.

Among all these duties the most important are the import duties

Effective tariffs

Tariffs are imposed on imports on or the other basis as mentioned above. Tariff which is

imposed on the basis of value of a commodity is a nomnal tariff. For example on an import of

manufactures a tariff of 20 percent is nominal tariff. Tariffs on imports may differ depending

on the type of a commodity or the stage of manufacturing process that a commodity has

undergone.It is possible a raw material may have no or very low tariff. The rate of tariff may

increase as the commodity undergoes higher states of manufacturing process where the value

added increases. Raw materials like cotton, leather, rubb er etc.may not attract much tariff

where as their final products will be subject to higher percentage of tariff.

Domestic producers are usually protected by a higher rate of tariffs on final goods and a very

low rate on imports of inputs. This encourage the manufacturing of final goods at home by

importing the required inputs.

The effective tariff rate refers to “The value of protection provided to a particular process of

production by the given nominal tariffs on a product and on material inputs used inits

production.” The process of production involves adding up values to the initial input in the

form of raw material. Larger the difference in the value of raw materials and final output

greater is the degree of effective tariff thereof. The effective tariff rate, or the effective rate of

protection, is the percentage increase in an industry’s value added per unit of output that

results from a country’s tariff structure . The standard of comparison is value added under

free trade.

31 | P a g e

Tariff and Non – Tariff Barriers

1. Tariff and Non – Tariff Barriers Overview

2. Trade Barriers Used to encourage and protect existing domestic industry Trade

barriers are Tariffs that Increase Trade Weaken Trade Restrict Trade Quotas Boycotts

and Embargoes .

3. Impact of Tariff (Tax) Barriers Tariff Barriers tend to Increase : Inflationary

pressures Special interests’ privileges Government control and political considerations

in economic matters The number of tariffs they beget via reciprocity Tariff Barriers

tend to Weaken : Balance-of-payments positions Supply-and-demand patterns

International relations (they can start trade wars)

4. Non Tariff - Trade Barriers Non Tariff barriers - are another way for an country to

control the amount of trade that it conducts with another country, either for selfish or

altruistic purposes. Any barrier to trade creates an economic loss, which means it does

not allow the markets to function properly.

5. Six Types of Non-Tariff Barriers 2) Customs and Administrative Entry Procedures:

Valuation systems Antidumping practices Tariff classifications Documentation

requirements Fees 1 ) Specific Limitations on Trade Quotas Import Licensing

32 | P a g e

requirements Proportion restrictions of foreign to domestic goods (local content

requirements) Minimum import price limits Embargoes.

6. Six Types of Non-Tariff Barriers (cont'd.) (3) Standards: Standard disparities

Intergovernmental acceptances of testing methods and standards Packaging, labeling,

and marking ( 4) Government Participation in Trade: Government procurement

policies Export subsidies Countervailing duties Domestic assistance programs .

7. Six Types of Non-Tariff Barriers (cont'd.) 5) Charges on imports: Prior import

deposit subsidies Administrative fees Special supplementary duties Import credit

discriminations Variable levies Border taxes 6) Others: Voluntary export restraints

Orderly marketing agreements

8. New Zealand's apples account for a third of its agricultural exports but have been

banned from Australia since 1921 due to fears about the spread of fire blight, a crop

pest. Apples Banned - Non Tariff Barrier By Doug Latimer in Sydney Published:

1:00AM BST 13 Apr 2010

9. Mangoes Philippines – Restrictions It is a common practice in many countries to

use non-tariff barriers to control the entry of imports. For instance, Philippine

mangoes and bananas have to meet strict phytosanitary requirements from the US and

Australia.

10. 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

33 | P a g e

Tariffs and Non-Tariff Measures

Under the WTO's Doha Development Agenda, the non-agricultural market access (NAMA)

negotiating group’s mandate is "to reduce, or as appropriate, eliminate tariffs, including the

reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff

barriers, in particular on products of export interest to developing countries. Product coverage

shall be comprehensive and without a priori exclusions. The negotiations shall take fully into

account the special needs and interests of developing and least-developed country

participants, including through less than full reciprocity in reduction commitments.”

Canada's Position

Our objective in these negotiations is to obtain “real” improvements in market access for

Canadian exporters, i.e. bound commitments on maximum tariffs that would be lower than

the tariffs currently being applied. Key markets of interest to our exporters include

industrialized countries in Europe and Asia as well as major developing countries such as

India, Brazil, China and many others.

Tariff Barriers:

By late June 2006, there was an emerging consensus that the best mechanism to achieve the

Doha mandate would be a “Swiss formula” applied to all tariff lines, with two coefficients

(one for developed countries and one for developing countries) that would reduce high tariffs

by proportionately more than low ones. Canada favours a Swiss formula with an aggressive

(low) coefficient for developed countries in order to improve our access to those markets, as

well as a developing country coefficient that, while somewhat higher, would still deliver

meaningful gains in major emerging markets.

To take ambition beyond what a formula would likely achieve, Canada is a leading supporter

of sectoral agreements, in which tariffs for certain industrial sectors would completely

eliminated or at least harmonized and reduced by greater-than-formula cuts. Canada has

proposed agreements for forest products, fish and fish products, chemicals (including

fertilizers) and raw materials, and other members’ sectoral proposals are also being

considered. We have been advocating high ambition by all members with respect to

environmental goods, in keeping with the Doha mandate.

34 | P a g e

NON TARIFF BARRIERS

Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in the

usual form of a tariff. Some common examples of NTB's are anti-dumping measures and

countervailing duties, which, although they are called "non-tariff" barriers, have the effect of

tariffs once they are enacted.

Their use has risen sharply after the WTO rules led to a very significant reduction in tariff

use. Some non-tariff trade barriers are expressly permitted in very limited circumstances,

when they are deemed necessary to protect health, safety, or sanitation, or to protect

depletable natural resources. In other forms, they are criticized as a means to evade free trade

rules such as those of the World Trade Organization (WTO), the European Union (EU), or

North American Free Trade Agreement (NAFTA) that restrict the use of tariffs.

Some of non-tariff barriers are not directly related to foreign economic regulations, but

nevertheless they have a significant impact on foreign-economic activity and foreign trade

between countries.

Trade between countries is referred to trade in goods, services and factors of production.

Non-tariff barriers to trade include import quotas, special licenses, unreasonable standards for

the quality of goods, bureaucratic delays at customs, export restrictions, limiting the activities

of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary

and phyto-sanitary measures, rules of origin, etc. Sometimes in this list they include

macroeconomic measures affecting trade.

35 | P a g e

Non-tariff barriers today

With the exception of export subsidies and quotas, NTBs are most similar to the tariffs.

Tariffs for goods production were reduced during the eight rounds of negotiations in the

WTO and the General Agreement on Tariffs and Trade (GATT). After lowering of tariffs, the

principle of protectionism demanded the introduction of new NTBs such as technical barriers

to trade (TBT). According to statements made at United Nations Conference on Trade and

Development (UNCTAD, 2005), the use of NTBs, based on the amount and control of price

levels has decreased significantly from 45% in 1994 to 15% in 2004, while use of other

NTBs increased from 55% in 1994 to 85% in 2004.

Increasing consumer demand for safe and environment friendly products also have had their

impact on increasing popularity of TBT. Many NTBs are governed by WTO agreements,

which originated in the Uruguay Round (the TBT Agreement, SPS Measures Agreement, the

Agreement on Textiles and Clothing), as well as GATT articles. NTBs in the field of services

have become as important as in the field of usual trade.

Most of the NTB can be defined as protectionist measures, unless they are related to

difficulties in the market, such as externalities and information asymmetries information a

symmetries between consumers and producers of goods. An example of this is safety

standards and labelling requirements.

The need to protect sensitive to import industries, as well as a wide range of trade restrictions,

available to the governments of industrialized countries, forcing them to resort to use the

NTB, and putting serious obstacles to international trade and world economic growth. Thus,

NTBs can be referred as a “new” of protection which has replaced tariffs as an “old” form of

protection.

36 | P a g e

TRENDS IN TARIFF AND NON TARIFF

BARRIERS

Although trade barriers are conventionally separated into tariff and non-tariff measures, this

rather simple categorization often obscures a very broad array of individual measures that are

potential trade barriers. Bourke (1988) provides a more comprehensive classification of trade

measures that are relevant to the global forest products trade:

· Specific limitations on trade - quantitative restrictions, export restraints, health and sanitary

regulations, licensing, embargoes, minimum price regulations, etc.

· Charges on imports - tariffs, variable levies, prior deposits, special duties on imports,

internal taxes, etc.

· Standards - industrial standards, packaging, labelling and marking regulations, etc.

· Government interventions in trade - government procurement, stock trading, export

subsidies or taxes, countervailing duties, trade diverting aid, etc.

· Customs and administrative entry procedures - customs valuation, customs classification,

anti-dumping duties, consular and customs formalities and requirements, sample

requirements, etc.

Such a range of trade measures is clearly diverse. Whether any implemented measure actually

is a fully fledged trade barrier - i.e. whether it intentionally or unintentionally leads to

discrimination against or restriction of trade - will depend on the circumstances in which the

specific measure is employed. This will clearly vary from country to country as well as from

product to product, which makes it extremely difficult to analyze and quantify the potential

effects on trade of the use of such measures.

37 | P a g e

Trends in Non-Tariff Barriers

While tariffs applied to global forest products trade may have been declining as a result of the

Tokyo Round negotiations and during the lead up to the Uruguay Round, non-tariff measures

have proliferated. Table 1 indicates the extent to which the general direction of movement in

non-tariff trade barriers to forest products has been the opposite to the reductions in tariff

barriers. Most alarming is that, although many non-tariff import barriers were generally static

or declining in the 1979-85 period just after the Tokyo Round, since 1985 there has been a

general increase in the use of such barriers. However, whether the recent trend of increasing

non-tariff import measures has had a significant impact on the forest products trade has again

proved difficult to determine. Some of the more important measures include:

· The use of tariff quota/ceiling system by the European Economic Community (EEC) and

Japan. The EEC quantitative restrictions were applied to a wide range of forest products,

including newsprint, fibre-building boards, plywood (separate ones for coniferous and non-

coniferous), builder's woodwork and some furniture items. A number of quality controls and

quantitative restrictions have been applied to plywood and veneer in Japan.

· EEC phytosanitary standards. Imports of all green coniferous softwood were prohibited to

most EEC countries unless they were either kiln-dried at 56o C or received a phytosanitary

certificate.

· US countervailing duties on Canadian softwood lumber. In July 1992 the US International

Trade Commission determined that Canadian softwood lumber was being subsidized through

low stumpage prices for logs and export rest

38 | P a g e

Tariff reduction and the growth of international trade

For goods and services alike, international trade grew dramatically in the second half of the

20th century. By the year 2000, total world trade was 22 times greater than it had been in

1950.

This increase in multilateral international trade occurred at the same time that trade barriers,

especially tariffs, were reduced or in some cases eliminated across the globe. A major

impetus to the global growth of trade was the General Agreement on Tariffs and Trade

(GATT), a series of trade agreements adopted in 1948. The system created under GATT

encouraged a series of trade negotiations focused on tariff reductions. The early trade

agreements were largely directed toward tangible goods such as agricultural products,

processed foods, steel, and automobiles. A round of negotiations known as the Uruguay

Round (1986–94) finally led to the creation of the World Trade Organization (WTO) in 1995.

Advances in information technology since the 1990s have altered the focus of many trade

agreements. In 1997 the WTO’s Information Technology Agreement (ITA) and Basic

Telecommunications Agreement (BTA) reduced the tariffs on computer and

telecommunications products and some intangible goods considered to be drivers of the

developing knowledge-based economy. The rapid growth of the Internet and electronic

commerce (e-commerce) represented some of the most challenging new issues in the

international trade arena, in part because many countries were slow to adopt bilateral free-

trade agreements that included provisions covering e-commerce.

The ITA and the BTA represented a dramatic departure from earlier national economic

policies, especially in cases where countries used prohibitively high tariffs and subsidies to

protect their technology industries from foreign competitors. Free-trade advocates and the

WTO have held that WTO-sponsored agreements offer the best means of providing lower

prices for consumers across a wide array of products while creating fairer competitive

conditions for international suppliers.

The work of the WTO came under increasing scrutiny from its critics, especially after 1999,

when trade talks were disrupted by globalization protesters during the WTO ministerial

conference in Seattle, Washington.

39 | P a g e

Trade Freedom

Trade freedom is a composite measure of the absence of tariff and non-tariff barriers that

affect imports and exports of goods and services. The trade freedom score is based on two

inputs:

The trade-weighted average tariff rate and

Non-tariff barriers (NTBs).

Different imports entering a country can, and often do, face different tariffs. The weighted

average tariff uses weights for each tariff based on the share of imports for each good.

Weighted average tariffs are a purely quantitative measure and account for the basic

calculation of the score using the following equation:

Trade Freedomi = (((Tariffmax–Tariffi )/(Tariffmax–Tariffmin )) * 100) – NTBi

where Trade Freedomi represents the trade freedom in country i; Tariffmax and Tariffmin

represent the upper and lower bounds for tariff rates (%); and Tariffi represents the weighted

average tariff rate (%) in country i. The minimum tariff is naturally zero percent, and the

upper bound was set as 50 percent. An NTB penalty is then subtracted from the base score.

The penalty of 5, 10, 15, or 20 points is assigned according to the following scale:

20—NTBs are used extensively across many goods and services and/or act to effectively

impede a significant amount of international trade.

15—NTBs are widespread across many goods and services and/or act to impede a majority of

potential international trade.

10—NTBs are used to protect certain goods and services and impede some international

trade.

5—NTBs are uncommon, protecting few goods and services, and/or have very limited impact

on international trade.

0—NTBs are not used to limit international trade.

40 | P a g e

Trade Problems for Developing Countries

Developing countries believe they get a raw deal when it comes to international trade. These

problems include

Relying on only one or two primary goods as their main exports

They cannot control the price they get for these goods

The price they pay for manufactured goods increases all the time

As the value of their exports changes so much long term planning is impossible

Increasing the amount of the primary good they produce would cause the world price

to fall .

Developing countries that try to export manufactured goods find that trade barriers are put in

their way. There are two types of trade barrier - quotas and tariffs.

1. A quota is a limit on the amount of goods a country can export to another country

2. A tariff is a tax on imports

Other problems that developing countries face are they are short of the money that is needed

to set up new businesses and industries. Also, developing countries have fewer people who

have the wealth to buy the goods made in local industries.

41 | P a g e

EXPORT SUBSIDY AND TRADE

Export subsidy is a government policy to encourage export of goods and discourage sale of

goods on the domestic market through low-cost loans or tax relief for exporters, or

government financed international advertising or R&D. An export subsidy reduces the price

paid by foreign importers, which means domestic consumers pay more than foreign

consumers. The WTO prohibits most subsidies directly linked to the volume of exports[1].

Export Subsidies are also generated when internal price supports, as in a guaranteed

minimum price for a commodity, create more production than can be consumed internally in

the country. That is without undermining the guaranteed minimum price. These price

supports are often coupled with import tariffs. Instead of letting the commodity rot or

destroying it the government exports it. Saudi Arabia is a net exporter of wheat, Japan often

is a net exporter of rice.

Export subsidies can also be a perpetual inflation machine: the government subsidises the

industry based on costs, but an increase in the subsidy is directly spent on wage hikes

demanded by employees. Now the wages in the subsidised industry are higher than

elsewhere, which causes the other employees demand higher wages, which are then reflected

in prices, resulting in inflation everywhere in the economy.

Export subsidies are payments made by the government to encourage the export of specified

products. As with taxes, subsidies can be levied on a specific or ad valorem basis. The most

common product groups where export subsidies are applied are agricultural and dairy

products.

Most countries have income support programs for their nation's farmers. These are often

motivated by national security or self-sufficiency considerations. Farmers' incomes are

maintained by restricting domestic supply, raising domestic demand, or a combination of the

two. One common method is the imposition of price floors on specified commodities. When

there is excess supply at the floor price, however, the government must stand ready to

purchase the excess.

42 | P a g e

FINDINGS

Many businesses find it difficult to achieve full compliance and understanding of

the rules on export control, customs, and duties.

More than 50% of the enterprises surveyed consider the lack of knowledge of

local trade restrictions to be the biggest or second-biggest challenge facing them

when exporting to countries outside the EU.

More than one in ten has suffered financial losses because they did not have

adequate knowledge of the rules.

Danish rules may also be the source of problems. Almost 20% had problems

exporting goods in the past couple of years because of export control rules.

Under the rules it is the responsibility of the enterprise to check whether the end

customer is on any watch lists even if the sale is made through a third party.

Many enterprises therefore check thoroughly who the actual recipient of the

goods is.

Many of the respondents have had problems even where all requirements were

satisfied.

All respondents say they would have been spared export control difficulties if

they had had the documentation and thorough descriptions of the goods in

advance, including descriptions of contents, materials and technology.

Almost 25% of the respondents , at some time, have had to abandon or postpone

exports or change or recall products because they did not meet the requirements

of the receiving country.

43 | P a g e

Conclusion

Trade barriers may occur in international trade when goods have to cross political boundaries.

A trade barrier is a restriction on what would otherwise be free trade. The most common

form of trade barriers are tariffs, or duties (the two words are often used interchangeably in

the context of international trade), which are usually imposed on imports. There is also a

category of nontariff barriers, also known as nontariff measures, which also serve to restrict

global trade. Tariffs and other trade barriers have a definite effect on consumption and

production. They serve to reduce consumption of the imported product, because the tariff

raises the domestic price of the import. They also serve to stimulate domestic production of

the product when that is possible, also because of the higher domestic price. Proponents of

tariffs argue that such an increase in domestic production is desirable, while opponents argue

that it is inefficient from an economic standpoint. The overall effect of tariffs and trade

barriers on international trade is to reduce the volume of trade and to increase the prices of

imports. Proponents of free trade argue that both of those results are undesirable, while

proponents of protectionism argue that tariffs may be necessary for a variety of reasons.

Tariff barriers to forest products trade have continued to decline in recent years, particularly

in the post-Tokyo Round era. The extent of the decline in tariffs differs with the market and

product. In developed country markets tariff rates had fallen generally to very low levels even

before the Uruguay Round schedules were agreed. However, tariff escalation has continued

in most developed countries, with specific products such as wood-based panels, builders'

joinery, coated and corrugated paper, kraft, and furniture generally receiving relatively higher

rates.

Compared to developed country markets, tariff rates have consistently been higher in

developing country markets. Although tariff escalation is a feature in most markets, some

developing countries have preferred a high uniform rate to applied across all forest products.

One important impact of the decline in tariff rates for forest products in developed country

markets is that the tariff differential between MFN and GSP rates has been reduced

44 | P a g e

significantly. Most tariff reductions have led to a general decline in the MFN rate, while the

GSP rate has been left largely unchanged. This suggests that exporters facing the full MFN

rates may have gained more from falling forest products tariff rates than developing countries

that previously benefitted from GSP and other preferential schemes. This effect is examined

explicitly in the analysis of the effects on the forest products trade of the Uruguay Round

tariff reductions in Section.

45 | P a g e

BIBLIOGRAPHY

BOOKS REFERRED

INTERNATIONAL MARKETING …. MANAN PRAKASHAN

NON TARIFF BARRIERS- AMAZON .COM

RESOURCE BOOKS---- OAS

WWWW. GOOGLE. COM