Nontariff Barriers To Trade Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

Nontariff barriers to trade (NTBs) are human-made barriers to trade other than simple tariffs. These restrictive practices are designed to evade free-trade rules imposed by regional or international agreement. They include obstructive customs practices, quotas, product standards that are often justified on health and safety grounds, requirement of licenses, government subsidies or procurement policies, and voluntary export restraints (VERs). What distinguishes NTBs from tariffs is a lack of transparency, which makes their use difficult to prevent. They have proliferated in recent decades, partly because the multilateral trading system has been quite effective, for manufactured goods at least, in reducing the use of tariffs. In response, the General Agreement on Tariffs and Trade (GATT) and more recently the World Trade Organization (WTO), guided by the principle of nondiscrimination in trade, has significantly extended the coverage of its rules to try to regulate NTBs.

The Growth Of Nontariff Barriers

The multilateral trading system that resulted from the GATT agreement in 1947 did not originally identify NTBs as part of its mandate. It was only in the 1960s during the Kennedy Round of GATT negotiations that they were first considered. During the 1970s, the world economy went through a recession, and the use of trade protectionism to save domestic jobs and industry became politically attractive. It was during this period that the use of NTBs grew at a significant rate, as countries sought to bypass the rules of the GATT. In particular they were used by countries in the West to discriminate against imports from the developing world.

During this period of economic turmoil, the use of VERs also increased substantially. They were usually developed as a response to political pressure from domestic industries that felt threatened by the growth of competitive imports. VERs were most often arranged on a bilateral basis with the exporting country “voluntarily” limiting the quantity of its exported goods to its trade partner. The United States, for example, had already been using VERs as part of its trade policy, but their use escalated in the early 1970s. VERs also began to be used for trade between developed economies in industries such as steel and automobiles. The Tokyo Round of the GATT (1973–1979) attempted to address the use of NTBs by creating six voluntary codes. However, these Tokyo codes, as they became known, were not very effective, because they were separate from the main rules of the GATT and applied only to those countries that chose to sign them. As a result, by the early 1980s it was clear that the GATT had become increasingly irrelevant in the face of these new forms of trade protectionism.

The WTO And Nontariff Barriers

The final round of the GATT led to the creation of the WTO at the beginning of 1995. This agreement made significant progress on the regulation of NTBs. The Tokyo codes that had proved rather ineffective were developed and made compulsory for all member states. Because of this, the WTO is now increasingly involved with domestic policies and institutional practices. Examples include the agreement on Technical Barriers to Trade and the agreement on Sanitary and Phytosanitary Measures (SPS). The latter tries to balance the need to ensure that food imports do not pose a threat to the health of consumers with the desire to make sure that health and safety standards are not being used to protect domestic producers. These standards tend to reflect those used in developed countries, and it is therefore developing countries that tend to bear the majority of the implementation costs. A similar problem faces developing countries in complying with the agreement on customs valuation. This aims to ensure a uniform procedure for estimating the cost of products when they reach customs. The Doha Development Round (named after Doha, Qatar)—the current trade negotiation round of the WTO—has stalled over disagreements on major issues, including NTBs.

Some critics of the WTO’s regulation of NTBs are unhappy with the intrusion into areas previously considered domestic politics. One particularly contentious case relating to the SPS agreement is the dispute between the European Union (EU) and the United States over the European ban on beef imports from cattle that have been injected with a growth hormone. The ban was justified by the EU on scientific grounds that the meat posed a health risk to consumers. The WTO’s Dispute Settlement Panel took advice from the World Health Organization and ruled that there was no health risk. The EU has continued the ban, and the WTO has allowed retaliatory trade measures by the United States and Canada.

Bibliography:

Daly, Michael, and Hiroaki Kuwahara. “The Impact of the Uruguay Round on Tariff and Non-Tariff Barriers to Trade in the ‘Quad.’” The World Economy 21 (1998): 207–234.
Fisher, Bob. “Preference Erosion, Government Revenues and Non-Tariff Trade Barriers.” The World Economy 29 (2006): 1377–1393.
Grieco, Joseph M. Cooperation among Nations: Europe, America, and Non-Tariff Barriers to Trade. Ithaca: Cornell University Press, 1990.
Hoekman, Bernard M., and Michel M. Kostecki. The Political Economy of the World Trading System:The WTO and Beyond. Oxford: Oxford University Press, 2001.
Victor, David G. “WTO Efforts to Manage Differences in National Sanitary and Phytosanitary Policies.” In Dynamics of Regulatory Change: How Globalization Affects National Regulatory Policies, edited by David Vogel and Robert Kagan, 227–268. Berkeley: University of California Press, 2004.

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