Non tariff barriers are hurdles or obstacles to imports other than tariffs.

Non tariff barriers to trade are trade

barriers but not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures
and countervailing duties, which, although 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 nontariff trade barriers are expressly permitted in very limited circumstances, when they are deemed necessary
to protect health, safety, sanitation, or 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 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.
One of the reasons why industrialized countries have moved from tariffs to NTBs is the fact that developed
countries have sources of income other than tariffs. Historically, in the formation of nation-states,
governments had to get funding. They received it through the introduction of tariffs. This explains the fact
that most developing countries still rely on tariffs as a way to finance their spending. Developed countries
can afford not to depend on tariffs, at the same time developing NTBs as a possible way of international
trade regulation. The second reason for the transition to NTBs is that these tariffs can be used to support
weak industries or compensation of industries, which have been affected negatively by the reduction of
tariffs. The third reason for the popularity of NTBs is the ability of interest groups to influence the process in
the absence of opportunities to obtain government support for the tariffs.

The trade literature uses ad valorem tariff equivalents to estimate the degree of restrictiveness of non-tariff
measures. Existing empirical evidence suggests that non-tariff measures can significantly restrict trade. The
ad valorem equivalent approach, however, presents conceptual and methodological limitations. In the
presence of market uncertainty or when non-tariff measures take the form of fixed market entry costs, nontariffs can have different effects to tariffs. Ad valorem equivalent estimates also fail to adequately capture the
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trade-restrictive effect of certain non-tariff measures in the presence of production sharing (Ferrantino 2012).
Another weakness of ad valorem equivalents is that they only provide an estimate of the overall effect of
non-tariff measures which cannot be decomposed by measure. In the case of the technical barriers to trade
and sanitary and phytosanitary measures more specifically, empirical evidence confirms that these may
either increase or decrease trade and that harmonisation and mutual recognition are ways in which any
negative trade effects can be mitigated.
Reasons for regulating non-tariff measures
Economic theories of trade agreements emphasise policy substitution as the main rationale for international
co-operation and regulation of non-tariff measures (Bagwell and Staiger 2002). In traditional theory, tariffs
are seen as the first-best instrument to manipulate the terms-of-trade. Governments set non-tariff measures to
address legitimate public policy concerns, and regulations on these measures only need to address policy
substitution between tariffs and non-tariffs. As for the commitment approach, it suggests that non-tariff
measures should be regulated because if they remain unbound, tariff commitments would be undermined as
policymakers could simply use them more intensively once tariff bindings have been negotiated.
Policy substitution, however, is not the only problem that the regulation of non-tariff measures in trade
agreements attempts to address. The report identifies several additional concerns related to the nature of nontariff measures that regulation may need to address.
First, their opacity considerably complicates co-operation on non-tariff measures, for instance by making
their enforcement more challenging.
Second, contrary to tariffs, non-tariff measures increase fixed costs and therefore deter market entry.
Governments may wish to cooperate to limit the strategic competitive effects of non-tariff measures.
Third, private standards adopted by economic agents can serve as non-tariff measures and governments may
wish to regulate them as they regulate non-tariff measures.
Finally, the fragmentation of the production process across different countries creates new forms of crossborder policy spillovers. These new forms of policy spillovers may require direct co-operation on non-tariff
measures.2

GATT/WTO disciplines on non-tariff measures

GATT rules on non-tariff measures are consistent with a shallow integration approach. They directly regulate
tariffs and other border measures, but impose no discipline on domestic measures other than a nondiscrimination obligation. They aim at ensuring that governments have the ability to use non-tariff measures
to achieve legitimate public policy purposes, so long as they do not replace bound tariffs with non-tariff
measures.

The agreements on technical barriers to trade and sanitary and phytosanitary measures are post
discriminatory agreements. They include obligations, such as the need to ensure that requirements are not
unnecessarily trade restrictive, that are additional to the non-discrimination obligation. They also encourage
the use of international standards, which can be seen as a weak form of regulatory convergence.

Tariffs and Modern Trade

The role tariffs play in international trade has declined in modern times. One of the primary reasons for the
decline is the introduction of international organizations designed to improve free trade, such as the World
Trade Organization (WTO). Such organizations make it more difficult for a country to levy tariffs and taxes
on imported goods, and can reduce the likelihood of retaliatory taxes. Because of this, countries have shifted
to non-tariff barriers, such as quotas and export restraints.
Organizations like the WTO attempt to reduce production and consumption distortions created by tariffs.
These distortions are the result of domestic producers making goods due to inflated prices, and consumers
purchasing fewer goods because prices have increased. (To learn about the WTO's efforts, read What Is The
World Trade Organization?)
Since the 1930s, many developed countries have reduced tariffs and trade barriers, which has improved
global integration and brought about globalization. Multilateral agreements between governments increase
the likelihood of tariff reduction, while enforcement on binding agreements reduces uncertainty.
The Bottom Line
Free trade benefits consumers through increased choice and reduced prices, but because the global economy
brings with it uncertainty, many governments impose tariffs and other trade barriers to protect industry.
There is a delicate balance between the pursuit of efficiencies and the government's need to ensure low
unemployment
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RECENT TRENDS IN NON TARIFF BARRIERS

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 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.
Except export subsidies and quotas, NTBs have become more prominent relative to tariffs. Tariffs on
manufacturing goods have been reduced to low levels through eight successive rounds of the World Trade
Organisation (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT). As of 2005,
the unweighted average tariff is roughly 3% in high-income countries, and 11% in developing countries
according to the World Bank, from respective levels at least three times as high in 1980. Export subsidies
have almost disappeared except in a few agri-food markets. Quotas have become less important, as they
have been converted into two-tier tariff schemes, the so called tariff-rate quotas. As tariffs have been
lowered, demands for protectionism have induced new NTBs, such as TBT interventions.

The United Nations Conference on Trade and Development (UNCTAD, 2005) estimates that the use of
NTBs based on quantity and price controls and finance measures has decreased dramatically, from a little
less than 45% of tariff lines faced by NTBs in 1994 to 15% in 2004, reflecting commitments made during
the Uruguay Round. However, the use of NTBs other than quantity and price controls and finance measures
increased from 55% of all NTB measures in 1994 to 85% in 2004. The use of TBT almost doubled, from
32% to 59% of affected tariff lines during the same period. The use of quantity control measures associated
with TBT showed a small increase, from 21% to 24% of affected tariff lines, suggesting that trade
impediments within TBT are rising. The average tariff equivalent is about 40% for the goods affected by
these NTBs.
The trade and welfare effects of non-tariff measures do not necessarily carry the same sign. Non-tariff
measures may reduce trade and yet increase welfare in the country that applies the measure. The effects
depend on the nature of the market failure that the measure addresses, the type of non-tariff measure used
and other market-specific circumstances. The trade and welfare effects of quality measures such as technical
barriers to trade and sanitary and phytosanitary measures depend on whether they address genuine market
failures. If a measure is applied only to protect domestic producers, both trade and welfare in the importing
country decrease. If, however, the measure corrects a market failure, welfare is likely to increase with
ambiguous effects on trade

Increased consumer demand for safety and environment-friendly attributes have also translated into an
increase in the number of TBT. Many NTBs are regulated by the WTO agreements that came out of the
Uruguay Round (the TBT Agreement, SPS Measures Agreement, the Agreement on Textiles and Clothing)
and articles of the original GATT, among others. NTBs in service industries have recently become more
important as trade in services has been expanding. Some NTBs may restrict trade but improve welfare in the
presence of negative externalities or informational asymmetries. Other NTBs can expand trade as they
enhance demand and trade of a good through better information about the good or by enhancing the goods
characteristics.

ABOUT THE REPORT

TITLE OF THE PROJECT
The project is titled as
"A STUDY ON INFLUENCE OF NON TARIFF BARRIERS (NTBS) ON DEVELOPED COUNTRIES "
OBJECTIVES
Following are the objectives of the study:
- To understand the concept of non tariff barriers
- to know the impact of NTBS on developed countries
- to know the recent trends in NTBS
SCOPE OF THE STUDY
To understand the concept of non tariff barriers in detail. To know its impact on both developed as well as
developing countries in recent times. And how it affects the trade activities ina country.
DATA COLLECTION
The following project is based on secondary data. Secondary data is collected from books and websites. No
primary data has been used.

LIMITATIONS
This project contains all the limitations of secondary data. Any other aspect other than the impact of non
tariff barriers is not mentioned in the project.

PRESENTATION OF THE STUDY

CHAPTER 1- gives a brief introduction to the concept NTBS and its recent trends
CHAPTER 2- mentions the various types of non tariff barriers
CHAPTER 3- enlightens on the various advantages and disadvantages of NTBs
CHAPTER 4- influence of NTBs on both developing as well as developed countries
CHAPTER 5- brief summary about the study.