Non Tariff Barriers (NTBs)
Non tariff barriers (NTBs) refer to restrictions to trades that are not established by and take form that is not that of tariff. Non tariff barriers are basically barriers of trade that restrict the imports into a country but they are different from the usual tariffs. Examples of non tariff barriers include levies, quotas, sanctions, and embargoes among other restrictions. They are commonly used by developed and large economies.
An economy can use non tariff barriers to control trades that it conducts with other economies. This can be for altruistic or selfish purposes. Nevertheless, any trade barrier results in economic loss because it hinders proper functioning of the markets. Revenues that are lost as a result of trade barriers can be considered to be economic losses.
Some non tariff barriers can result from conditions, prohibitions and requirements for specific markets that make exportation or importation of some products costly or difficult. Some non tariff barriers can include improper or unjustified application of measures like SPS or Sanitary and phytosanitary measures as well as Technical Barriers to Trade abbreviated as TBT.
Nevertheless, most cases of non tariff barriers are caused by government measures such as government laws, policies, regulations and specific restrictions. Some practices of the private sector in a country or prohibitions aimed at protecting domestic industries can also cause the barriers.
Use of non tariff barriers has increased rapidly since the reduction of tariff use by the World Trade Organization. There is explicit permission for the use of some of the non tariff barriers to trade in some circumstances although they are limited.
Non tariff barriers should only be used when it is necessary to protect safety, health, sanitation and natural resources that can be depleted. In other cases, use of non tariff barriers is criticized and seen as a means of evading the rules of free trade such as the ones of WTO, EU and NAFTA that have restrictions on how tariffs are used.
Although some non tariff barriers do not have any direct relation with the regulations of foreign economies, they affect the activities of foreign economies significantly as well as the trade between nations. For instance, use of special licenses and setting unreasonable quality standards for goods can limit trade activities between countries.
Today, the WTO agreements govern non tariff barriers. Most non tariff barriers are seen as protectionist strategies or measures unless in situations where they are associated with challenges in a marker such as information asymmetries among producers and consumers as well as externalities.
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