TRADE PROTECTION

MEASURES / BARRIERS TO
TRADE
This can also be termed as
Barriers to International Trade

TARIFF BARRIERS

NON TARIFF BARRIERS

 TARIFFS
 Tariffs are taxes imposed on goods
involved in International trade

 Tariff increases the price at which the

goods are sold in the importing country
and therefore makes them less
competitive with locally produced goods.
 CLASSIFICATION OF TARIFFS
 On the basis of Origin :
1. Export Duty: Tax levied by the country of origin,
on a commodity designated for use in other
countries.

The majority of finished goods do not attract

export duty.

Such duties are normally imposed on the primary

products in order to conserve them for domestic
industries/consumers.e.g oilseeds, onions,
coffee.
2. Import duty:
is a tax imposed on a commodity originating in
another country by the country for which the
product is designated.
The purpose of heavy duty is to raise revenue
and to provide protection to domestic countries
.
3. Transit duty:
tax imposed on a commodity when it crosses
the national frontier between the originating
country and the country to which it is
consigned to.
ON THE BASIS OF QUANTIFICATION

1. Ad Valorem duty
The kind most commonly used, is one that is
calculated as a percentage of the value of the
imported goods - for example, 10, 25 or 35 per
cent.

2. Specific duty
Is a flat sum collected per unit of the goods
imported (based on weight, number, length,
volume or other unit of measurement.) Specific
duties are often levied on foodstuffs and raw
materials.
3. Alternative duty
Is where both an Ad Valorem duty and A
Specific duty are prescribed for a product, with
the requirement that the more burdensome one
shall be Ad Valorem duty value plus 10 rs. per
kilo.

4. Compound duties
Are imposed on manufactured goods that
contain raw materials that are themselves
subject to import duty. The "specific" part of the
compound duty (called compensatory duty) is
levied as protection for the local raw material
industry.
 On the basis of the purpose they serve
1) Revenue tariff:
It aims at collecting substantial revenue for the
government but tries not to obstruct flow of
goods.
Here the duty is imposed on items of mass
consumption, but the rate of duty is low

2) Protective tariff :
aims at giving protection to home industries by
restricting or eliminating competition.
These tariffs are usually high so as to reduce
imports.
3) Anti-dumping duty:
dumping is the commercial practice of selling
goods in foreign markets at a price below their
normal cost so as to capture the foreign market.
4) Countervailing duty:
duty imposed to nullify the benefits offered
through cash assistance or subsidies , by the
foreign country to its manufacturers in the
destination country.
The rate of such duty will be proportional to the
extent of cash assistance or subsidy granted.
D) On the basis of trade relations:

1) Single column tariff:

tariff rates are fixed for various commodities and the
same rates are made applicable to imports from all other
countries
2) Double column tariff :
here , two rates of duties are fixed.
The lower rate is made applicable to a friendly country
or to a country with which the importing country has a
bilateral trade agreement.
The higher rate is applicable to all other countries.
3) Triple Column Tariff
3 rates are applied: General, International
and Preferential
 NON TARIFF BARRIERS
Non Tariff Barriers are quantitative
Restrictions i.e. Entry of Foreign goods
over and above specific limit fixed by the
Govt. is Restricted

This controls quantity of Imports but not the

price of the Imported Product
 Types of Non-tariff barriers

A) Quota system:
The quantity of a commodity permitted to be imported
from various countries during a given period is fixed in
advance.

The different types of quota are

1) Tariff quota: imports of a commodity up to a specific

volume are allowed duty free or at a special low rate.
Imports in excess of this limit are subject to duty or a
higher rate of duty.
2) Unilateral quota:
Here a country unilaterally fixes a ceiling
on the quantity of the import of a particular
commodity.

3) Bilateral quota :
results from negotiation between the
importing country and a particular supplier
country. Or between the importing country
and export groups within the supplier
country.
B) Import Licensing:
Here the prospective importers are obliged
to obtain a license from the licensing
authorities .
The possession of an import license is
necessary to obtain the foreign exchange
to pay for the imports.
It is a powerful device for controlling the
quantity of imports.
C)Voluntary Export Restraints:
are bilateral arrangements instituted to restrain the
rapid growth of exports of specific manufactured
goods.

Under VERs , the exporting country voluntarily

restrains the export of the specific product in order
to either help the other country to reduce its trade
deficit or to protect domestic industry (of the
importing country).

VERs are adopted under pressure from the importing

country
E.g.. Japanese Govt.’s self – imposed VER on
Exports of its cars to US Markets
D) State Trading :
refers to import-export activities conducted by the
government or a govt. agency.
State trading acts as a barrier, restricting the freedom of
private parties.
Current important examples of import STEs in world
agricultural commodity markets include the Japanese
Food Agency (barley, rice, and wheat), South Korea’s
Livestock Products Marketing Organization, and
China’s National Cereals, Oil and Foodstuffs Import
and Export Commission (COFCO).
E) Preferential treatment through trading blocs:

Some countries form regional groups and offer special

concessions and preferences to member countries.
As a result trade is developed among the member
countries and allows advantages to all member
countries.
But it acts as a barrier to non-member countries.
F) Health and safety measures:
many countries have specific rules regarding
health and safety regulations. Such health and
safety measures are mainly applicable to raw
materials and food items.
e.g Import of chicken was banned from china
after bird flu was reported.
G) EMBARGO/ SANCTIONS
It refers to a complete ban on trade in 1 or
more products with a particular country

It is the most restrictive Non Tariff Barrier

E.g.: Import of Beef , in any form , in India is

prohibited
H) SUBSIDIES :
A subsidy is Government payment to Local
Producer, including cash grants, low interest
loans etc.

E.g. Indian Govt. granting interest subsidy and

incentives to explore new markets on exports in
textile, leather and engineering.
 I) LOCAL CONTENT REQUIREMENT :
It is a legal stipulation that certain amount of goods /
services be supplied by Producers in the domestic
market
A local content requirement is a regulation
that requires a specified fraction of a final
good to be produced domestically.

It may be specified in value terms, by

requiring that some minimum share of the
value of a good represent domestic valued
added, or in physical units.

E.g. Tariff for Automobile Imports in Malaysia