Do the non tariff barriers / measures affect the foreign trade?
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The Impact of Non-Tariff Barriers on Foreign Trade
Introduction to Non-Tariff Barriers (NTBs)
Non-tariff barriers (NTBs) are regulatory measures other than tariffs that countries use to control the amount of trade across their borders. These measures include quotas, import licenses, sanitary and phytosanitary standards (SPS), and technical barriers to trade (TBT). While NTBs are often implemented to protect consumers and ensure product standards, they can significantly impact international trade by increasing the cost and complexity of importing and exporting goods.
Reduction in Imports Due to NTBs
Research indicates that NTBs can substantially reduce imports. For instance, the implementation of NTBs has been shown to reduce imports of affected products by up to 12%, a trade dampening effect comparable to that of anti-dumping duties. This reduction is less pronounced for exporters that have free trade agreements with the importing country, suggesting that such agreements can mitigate some of the negative impacts of NTBs.
Diverse Effects of Different NTBs
Different types of NTBs affect trade to varying extents. Sanitary and phytosanitary standards (SPS) and technical barriers to trade (TBT) have been identified as having the largest negative impact on international trade. Specifically, TBTs are particularly trade-impeding for high-income countries in Europe and Central Asia. On the other hand, while SPS measures increase trade costs, they can also have a positive effect on the demand side, which may offset some of the negative impacts.
NTBs and Market Access
NTBs can significantly lower market access for exporters. Behind-the-border measures, which include domestic regulations and standards, have been shown to reduce the market access of importing countries. This is particularly relevant for countries like Morocco, where NTBs have been found to negatively affect foreign trade, with exporting sectors suffering more in trade with economically similar countries than with developed nations.
NTBs in the Context of Deep Trade Agreements
Deep trade agreements (DTAs) that go beyond tariff reductions to address NTBs and behind-the-border barriers have been shown to significantly increase trade in goods and services. These agreements have contributed to over 40% of the welfare gains from trade globally, with even higher benefits for advanced economies. For example, the accession of Eastern European countries to the EU, which involved deep commitments to reduce NTBs, resulted in substantial trade and welfare gains.
Case Studies: US, China, and India
In the United States, NTBs such as quotas, licenses, and technical standards continue to hinder the free flow of goods and services, affecting both the economy and consumers. In China, NTBs have restricted the export of products, leading to significant losses for Chinese enterprises. However, these barriers have also driven Chinese companies to innovate and improve their competitiveness in the international market. In India, the effects of NTBs on trade with major partners like China and the USA have been found to be volatile, with other factors such as GDP and domestic demand also playing significant roles in determining trade volumes.
Conclusion
Non-tariff barriers have a profound impact on foreign trade by increasing trade costs and reducing market access. While they can protect consumers and ensure product standards, their trade-impeding effects are significant and varied across different types of NTBs and countries. Deep trade agreements that address NTBs can mitigate these negative impacts and enhance global trade and welfare. Understanding and managing NTBs is crucial for countries aiming to optimize their trade policies and improve their economic outcomes.
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