GLOBALIZATION AND TARIFF & NON-TARIFF BARRIERS

PRESENTED BY: AMANEET SINGH BRAR JYOTI

GLOBALIZATION
Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world.

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Globalization is not new, though. For thousands of years, people and, later, corporations have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages.

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WHAT IS GLOBALIZATION
An English princess and her Egyptian lover perish in a car crash inside a French tunnel while traveling in a German vehicle with a Dutch engine driven by a Belgian, who had earlier had a sip of Scottish whisky and was trying to elude their Italian paparazzi pursuers driving a Japanese motorbike. She is subsequently administered CPR by an American paramedic using Brazilian pharmaceuticals. THAT is globalization!
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DRIVERS OF GLOBLISATION
Huge markets of developing economies MNCs take advantage of low cost production Changing demographics Regional Trading Blocks Declining Trade & Investment Barriers Technology

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ADVANTAGES OF GLOBALIZATION
Goods and people are transported with more easiness and speed the possibility of war between the developed countries decreases free trade between countries increases global mass media connects all the people in the world as the cultural barriers reduce, the global village dream becomes more realistic the interdependence of the nation-states increases as the liquidity of capital increases, developed countries can invest in developing ones the flexibility of corporations to operate across borders increases the communication between the individuals and corporations in the world increases environmental protection in developed countries increases
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DISADVANTAGES OF GLOBALIZATION
Increased flow of skilled and non-skilled jobs from developed to developing nations as corporations seek out the cheapest labour Increased likelihood of economic disruptions in one nation effecting all nations Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage Greater risk of diseases being transported unintentionally between nations Spread of a materialistic lifestyle and attitude that sees consumption as the path to prosperity International bodies like the World Trade Organization infringe on national and individual sovereignty Decreases in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries
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TRADE BARRIERS
Trade barriers refer to government-imposed policies to restrict international trade. Most commonly, a countrys government employs tariffs, duties, embargoes and subsidies as trade barriers. However, imposing trade barriers are against the concept of free trade, popularized by developed nations. Almost every trade barrier works as a tool to ensure a protectionism policy. Trade barriers aim to hike the prices of imported products in order to secure the domestic industry against fierce competition from foreign products.

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ECONOMIC IMPACT OF TRADE BARRIERS

In times of flourishing international trade, imposing trade barriers prevents the nation from fully realizing the economic benefits of such globalized trade. Import restrictions affect international trade relations, which in turn leads to a decline in exports. Thus, the protectionism regime that is employed to protect certain sectors actually tends to retard the growth of the entire economy. Free trade environments offer greater and better choices in the market, leading to enhanced consumer satisfaction. With trade barriers in place, the government curbs consumer rights to enjoy competition in the market.

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WHY ARE TRADE BARRIERS USED

Trade Barriers are often created to protect infant or dying industries and developing economies, but are also used by more advanced economies with developed industries. Here are five of the top reasons: Protecting Domestic Employment Protecting Consumers Infant Industries National Security Retaliation

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TYPES OF TRADE BARRIERS

Types of Trade Barriers

Tariff Barriers

Non-Tariff Barriers

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TARIFFS
The levy of ordinary negotiated customs duties in accordance with Article II of the GATT Many governments impose tariffs and other trade barriers to protect industry. A tariff is a tax added to the cost of imported goods. Countries may also use tariffs to retaliate against other trade partners. What Is a Tariff? A tariff is a tax on imports, which raises the price of the good to the consumer.

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TARIFF BARRIERS
Anti-dumping Duty Countervailing Duty High Customs Duty Specific Tariffs Ad Valorem Tariffs

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 ANTI-DUMPING DUTY Duty imposed to offset the advantage gained by the foreign exporters when they sell their goods to an importing country at a price far lower than their domestic selling price or below cost. COUNTERVAILING DUTY Duty imposed in addition to regular import duty, in order to counteract the subsidy paid to foreign export-manufacturers by their government that would reduce the cost of goods.

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 HIGH CUSTOMS DUTY Customs duty is a kind of indirect tax which is realized on goods of international trade. Customs duties levied on imports at rates specified in Annual Budget. SPECIFIC TARIFFS 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.

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 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.

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WHO BENEFITS ?
The benefits of tariffs are uneven. Because a tariff is a tax, the government will see increased revenue as imports enter the domestic market. Domestic industries also benefit from a reduction in competition, since import prices are artificially inflated. Unfortunately for consumers - both individual consumers and businesses - higher import prices mean higher prices for goods.

In short, tariffs and trade barriers tend to be pro-producer and anticonsumer.

In the short run, higher prices for goods can reduce consumption by individual consumers and by businesses. During this time period, businesses will profit and the government will see an increase in revenue from duties. In the long term, businesses may see a decline in efficiency due to a lack of competition. For the government, the long-term effect of subsidies is an increase in the demand for public services, since increased prices, especially in foodstuffs, leave less disposable income.

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NON TARIFF BARRIERS

These include quantitative restrictions, or quotas, that may be imposed by one country or as the result of agreements between two or more countries. All forms of discrimination against imports other than import duties.

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TYPES OF NON-TARIFF BARRIERS Licensing Import Quotas Voluntary Exports Restraints Product Standards Technical Barriers Foreign exchange restrictions and foreign exchange controls Domestic Content Requirement Government Procurement

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LICENSES
A license allows the business to import a certain type of good into the country. This creates a restriction on competition, and increases prices faced by consumers.

IMPORT QUOTAS
It is a direct quantitative restriction on the amount of a commodity allowed to be imported. Often associated with issuance of licenses.

VOLUNTARY EXPORTS RESTRIANTS (VER)

An importing country induces another nation to reduce its exports of a commodity voluntarily Imposed on the exporter under the threat of sanction to limit the export of certain goods in the importing country.

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PRODUCT STANDARDS
Countries usually impose standards on classification, labeling and testing of products. Done in order to be able to sell domestic products and to block sales of products of foreign manufacture.

TECHNOLOGICAL BARRIERS
Health and sanitary regulations and quality standards. Packaging and labeling regulations, including trademarks. Advertising and media regulations

FOREIGN EXCHANGE RESTRICTIONS AND CONTROLS

It constitute the regulation of transactions of residents and nonresidents with currency and other currency values. The establishment of the national currency against foreign currencies.

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DOMESTIC CONTENT REQUIREMENT

It mandates that a certain percentage of good is to be made domestically. They can be a barrier to imports of the products that do not meet the content rules.

GOVERNMENT PROCUREMENT
Governments are major purchasers of goods and services. In many countries the governments buy relatively few imported products and buy mostly locally produced products, barrier to foreign products.

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NON-TARIFF BARRIERS IN INDIA

Import Licensing: One of the most common non-tariff barriers is the prohibition or restrictions on imports maintained through import licensing requirements. Though India has eliminated its import licensing requirements for most consumer goods, certain products face licensing related trade barriers. For example, the Indian government requires a special import license for motorcycles and vehicles that is very restrictive. Import licenses for motorcycles are provided to only foreign nationals permanently residing in India, working in India for foreign firms that hold greater than 30 percent equity or to foreign nations working at embassies and foreign missions. Some domestic importers are allowed to import vehicles without a license provided the imports are counterbalanced by exports attributable to the same importer.

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 Standards, testing, labelling & certification: The Indian government has identified 109 commodities that must be certified by its National Standards body, the Bureau of Indian Standards (BIS). The idea behind these certifications is to ensure the quality of goods seeking access into the market, but many countries use them as protectionist measures. For more on how this relates to labelling requirements, please see the section on Labelling and Marking Requirements in this chapter. Export subsidies and domestic support: Several export subsidies and other domestic support is provided to several industries to make them competitive internationally. Export earnings are exempt from taxes and exporters are not subject to local manufacturing tax. While export subsidies tend to displace exports from other countries into third country markets, the domestic support acts as a direct barrier against access to the domestic market.

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 Anti-dumping and countervailing measures: Anti-dumping and countervailing measures are permitted by the WTO Agreements in specified situations to protect the domestic industry from serious injury arising from dumped or subsidized imports. India imposes these from time-to-time to protect domestic manufacturers from dumping. India's implementation of its antidumping policy has, in some cases, raised concerns regarding transparency and due process. In recent years, India seems to have aggressively increased its application of the antidumping law. In the first half of the calendar year 2006 India topped the list of countries initiating new anti-dumping investigations with 20 new initiations. Service barriers: Services in which there are restrictions include: insurance, banking, securities, motion pictures, accounting, construction, architecture and engineering, retailing, legal services, express delivery services and telecommunication.

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Procurement: The Indian government allows a price preference for local suppliers in government contracts and generally discriminates against foreign suppliers. In international purchases and International Competitive Bids (ICB's) domestic companies gets a price preference in government contract and purchases
Other barriers: Equity restrictions and other trade-related investment measures are in place to give an unfair advantage to domestic companies. The GOI continues to limit or prohibit FDI in sensitive sectors such as retail trade and agriculture. Additionally there is an unpublished policy that favors counter trade. Several Indian companies, both government-owned and private, conduct a small amount of counter trade

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BARRIERS PULL INDIA DOWN IN GLOBAL TRADE INDEX

India has been ranked 71st in global enabling trade index (ETI) because of tariff barriers and corruption-ridden border administration that oversees flow of goods, according to the World Economic Forum's (WEF's) Global Enabling Trade Report 2008 Unlike China, which is ranked 48th, India continues to have restrictive market access with tariff barriers "representing a more serious impediment that non-tariff barriers," says the report. Consequently, India is ranked 105th in market access among the 118 countries surveyed in the report with tariff and non-tariff barriers pushing the country to the 112th place.

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INDIA & BANGLADESH

Despite warm relations with India, Bangladeshi products still face about a dozen non-tariff trade barriers to the Indian markets, which have hampered the expected pace of export growth, according to a study conducted by the Bangladesh High Commission in New Delhi. Harsh testing requirement, complex harmonised code classifications, inadequate infrastructure, and special labelling requirements are among major non-tariff barriers that Indian authorities have imposed, to hinder Bangladeshi exports. the imposition of such non-tariff barriers has seriously impacted the potential of Bangladeshi exports to India. Mahbub Hassan Saleh, Bangladesh deputy high commissioner in New Delhi, after conducting the investigation, said that the government should negotiate with its counterpart, in this regard. Trade deficit between India and Bangladesh doubled to USD 4.05 billion in FY 2010-11, from USD 2.0 billion in FY 2006-07, according to Export Promotion Bureau statistics. Bangladesh imported Indian goods worth USD 4.57 billion in FY 2010-11, while it exported goods worth USD 512 million to India, during the same period.

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INDIA & PAKISTAN

There is large untapped trade potential between the two countries of US$11.7 billion. The export potential from Pakistan to India is US$ 2.2 billion while that from India to Pakistan is to the tune of US$ 9.5 billion.
November 4, 2011

Pakistan's decision to give India Most Favoured Nation (MFN) status is a big leap forward in bilateral relations. Paradoxically, the term of art connotes the opposite of what it means in common speech under MFN a country agrees to treat another country equally with all the other countries with which it trades, as part of the agreement in the World Trade Organisation on non-discriminatory trade practices. As India and Pakistan are WTO members, this should have happened as a matter of course, but their uniquely poor relations ensured that even the routine was difficult. India accorded MFN to Pakistan in 1996 but Islamabad, which had linked improvement of trade ties to the resolution of the Kashmir issue, was propelled by the logic of its own position to withhold reciprocity.

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 All Pakistan Textile Mills Association (Aptma) Chairman Mohsin Aziz said India should remove the non-tariff barriers to make MFN status a success. He termed the grant of MFN status a right step in the right direction, but said India faced the challenge of removing the trade barriers against Pakistani products. According to Aziz, though Delhi gave MFN status to Pakistan in 1996, still countless trade barriers were in place against Pakistani goods in the Indian market.
On the other hand, the Lahore Chamber of Commerce and Industry (LCCI) asked the government to take industries like pharmaceutical, automobile, motorcycle, petrochemical, auto parts, sugar, textile, cooking oil and ghee into confidence before signing the MFN document.

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 According to statistics, trade between the two sides was $1.4 billion in 2009-10. Of this, Indian exports to Pakistan stood at $1.2 billion, while Pakistans exports to India were a meagre $268 million. It is a clear proof that India has not opened up its market to Pakistani goods, he said. The top 50 items having export potential from Pakistan to India of which 27 are textile items and 23 are non-textile items. In the textile product category, India is importing all the items from the rest of the world but not from Pakistan. From the non-textile items India is importing only five items from Pakistan. In other words, out of the top 50 items having export potential from Pakistan, India is importing 45 from the rest of the world but not from Pakistan

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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. Therefore a perfect balance needs to be there.

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REFERENCES
http://www.globaltrade.net/f/business/text/India/Trade-Policy-Trade-Barriers-inIndia.html http://www.investopedia.com/articles/economics/08/tariff-trade-barrierbasics.asp

http://www.business-standard.com/india/news/tariff-barriers-pull-india-down-inglobal-trade-index/326530/
http://www.defence.pk/forums/bangladesh-defence/138326-exports-india-hithard-non-tariff-barriers-study.html http://www.icrier.org/pdf/Working%20Paper%20200.pdf

http://tribune.com.pk/story/287308/pakistan-india-ties-non-tariff-barriers-stillthere/
http://www.thehindu.com/opinion/editorial/article2598710.ece

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