Harmonization of trade standards and their impact on Indian exports

Abstract

A trade barrier is general term that describes any government policy or regulation that restricts international trade, the barriers can take many forms, including: • Import duties • Import licenses • Export licenses • Quotas • Tariffs • Subsidies • Non-tariff barriers to trade Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded produce. Free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even countries promoting free trade heavily subsidize certain industries, such as agriculture and steel. A few examples of free trade areas are the North American Free Trade Agreement (NAFTA), European Free Trade Association, European Union (EU) and South American Community of Nations. 4 Tariffs, which are taxes on imports of commodities into a country or region, are among the oldest forms of government intervention in economic activity. They are implemented for two clear economic purposes. First, they provide revenue for the government. Second, they improve economic returns to firms and suppliers of resources to domestic industry that face competition from foreign imports. Tariffs are widely used to protect domestic producers’ incomes from foreign competition. This protection comes at an economic cost to domestic consumers who pay higher prices for import competing goods, and to theeconomy as a whole through the inefficient allocation of resources to the import competing domestic industry. Therefore, since 1948, when average tariffs on manufactured goods exceeded 30 percent in most developed economies, those economies have sought to reduce tariffs on manufactured goods through several rounds of negotiations under the General Agreement on Tariffs Trade (GATT). Tariffs when coupled with other barriers to trade they have often constituted formidable barriers tomarket access from foreign producers. In fact, tariffs that is set high enough can block all trade and act just as import bans. A tariff-rate quota (TRQ) combines the idea of a tariff with that of a quota. The typical TRQ will set a low tariff for imports of a fixed quantity and a higher tariff for any imports that exceed that initial quantity. In a legal sense and at the WTO, countries are allowed to combine the use of two tariffs in the form of a TRQ, even when they have agreed not to use strict import quotas. Explicit import quotas used to be quite common in trade. They allowed governments to strictly limit the amount of imports of a commodity and thus to plan on a particular import quantity in setting domestic commodity programs. Lately, subtle forms of protectionism are being put in place. Most of these protections come in the nature of non-tariff barriers (NTBs). Non Tariff Trade Barriers are non-quantifiable and discriminatory in application.