current situatiion and development of nontariff barrier.doc

Current Situation and Development of Nontariff Barriers付继洁1.1 Background Tariff barrier and nontariff barrier are two tools of trade protection. After the World War Two, with several rounds of trade negotiation held by GATT, tariff level has been lowered significantly. Tariff barrier can only play a role in an ever smaller scope. At the same time, due to economic globalization and trade liberation, all the countries are intensifying their struggle for world market. trade competition between countries reached a white-hot level. So under the WTO regulations, trade protectionism does not shrank a little, it expands. Nontariff barrier is an undeniable evidence. In many countries, nontariff barriers are main measures for trade protection. In 1967,during the Kennedy Round, there are only 80 kinds of nontariff barriers, but in 1997, nontariff barriers has increased to 3000 kinds only in ten years. The development of nontariff barriers has in-depth influence on world trade and Chinas foreign export. After the implementation of Open-up policy, China has made the world-known achievement in foreign trade. Comprehensive national power increased apparently. In 2002, Chinas export hit 300 billion for the first time, achieve 325 billion. At the same time, developed countries put forward more and more nontariff measures which is directed against China. Now we are facing with multiple nontariff barriers, like anti-dumping, technological barrier and so on. take anti-dumping and safeguard measures as examples, over 32 countries has launched anti-dumping and safeguard investigation against Chinas exported products until 2002. We have lost more than 15 billion dollars. It is notable that Chinas foreign trade first meets deficit on January, 2003 for 1.24 billion. And export trade increases slowly in the following months. Nontariff barrier has existential and potential threat to Chinas foreign trade. So it is necessary to conduct deeper research on nontariff barrier and to trace its development, so that we can take different approaches to deal with it. 1.2 Objectives of this study The purpose of this study is two-folded, the first is to define and identify nontariff barrier and its latest forms, and assess their role in foreign trade both macro- and micro-approaches. Using a micro approach, several case studies are undertaken to examine nontariff barriers role in foreign trade. Those studies focus on the cases which is directed against China. In a macro-approach, this study will estimate the overall effect of nontariff barriers on foreign trade. And to see whether nontariff barriers are more effective in reducing imports. The second purpose is to investigate the latest development and trend of nontariff barriers. International criticism about nontariff barriers do not seem to lessen. However, new forms of nontariff barriers emerges in endlessly. This study aims to analysis the latest forms of the nontariff barriers and their influence.1.3 Contribution of the study The contribution of the study is two-folded, the first is to help us understand the mechanism and absolute effect of nontariff barriers. Those has been neglected in the past literature. True understanding of nontariff barriers is only obtained through analysis of individuals nontariff barriers in specific cases. As most of the former nontariff studies mainly focus on theoretical research and lacks of latest cases, the second contribution is to provide the latest forms and trend of nontariff barriers, so we can find different measures to deal with different forms of nontariff barriers. 1.4 Recent research Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTBs are anti-dumping measures and countervailing duties, which, although they are 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 non-tariff trade barriers are expressly permitted in very limited circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect 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 they 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. 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 information asymmetries between consumers and producers of goods. An example of this is safety standards and labeling 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. There are several different variants of division of non-tariff barriers. Some scholars divide between internal taxes, administrative barriers, health and sanitary regulations and government procurement policies. Others divide non-tariff barriers into more categories such as specific limitations on trade, customs and administrative entry procedures, standards, government participation in trade, charges on import, and other categories. We choose traditional classification of non-tariff barriers, according to which they are divided into 3 principal categories. The first category includes methods to directly import restrictions for protection of certain sectors of national industries: licensing and allocation of import quotas, antidumping and countervailing duties, import deposits, so-called voluntary export restraints, countervailing duties, the system of minimum import prices, etc. Under second category follow methods that are not directly aimed at restricting foreign trade and more related to the administrative bureaucracy, whose actions, however, restrict trade, for example: customs procedures, technical standards and norms, sanitary and veterinary standards, requirements for labeling and packaging, bottling, etc. The third category consists of methods that are not directly aimed at restricting the import or promoting the export, but the effects of which often lead to this result. There are some examples of the popular nontariff barriers. 1.The most common instruments of direct regulation of imports (and sometimes export) are licenses . Almost all industrialized countries apply these non-tariff methods. The license system requires that a state (through specially authorized office) issues permits for foreign trade transactions of import and export commodities included in the lists of licensed merchandises. Product licensing can take many forms and procedures. The main types of licenses are general license that permits unrestricted importation or exportation of goods included in the lists for a certain period of time; and one-time license for a certain product importer (exporter) to import (or export). One-time license indicates a quantity of goods, its cost, its country of origin (or destination), and in some cases also customs point through which import (or export) of goods should be carried out. The use of licensing systems as an instrument for foreign trade regulation is based on a number of international level standards agreements. In particular, these agreements include some provisions of the General Agreement on Tariffs and Trade and the Agreement on Import Licensing Procedures, concluded under the WTO. 2.Licensing of foreign trade is closely related to quantitative restrictions quotas - on imports and exports of certain goods. A quota is a limitation in value or in physical terms, imposed on import and export of certain goods for a certain period of time. This category includes global quotas in respect to specific countries, seasonal quotas, and so-called voluntary export restraints. Quantitative controls on foreign trade transactions carried out through one-time license.The consequence of this trade barrier is normally reflected in the consumers loss because of higher prices and limited selection of goods as well as in the companies that employ the imported materials in the production process, increasing their costs. An import quota can be unilateral, levied by the country without negotiations with exporting country, and bilateral or multilateral, when it is imposed after negotiations and agreement with exporting country. An export quota is a restricted amount of goods that can leave the country. There are different reasons for imposing of export quota by the country, which can be the guarantee of the supply of the products that are in shortage in the domestic market, manipulation of the prices on the international level, and the control of goods strategically important for the country. In some cases, the importing countries request exporting countries to impose voluntary export restraints. 3.Embargo is a specific type of quotas prohibiting the trade. As well as quotas, embargoes may be imposed on imports or exports of particular goods, regardless of destination, in respect of certain goods supplied to specific countries, or in respect of all goods shipped to certain countries. Although the embargo is usually introduced for political purposes, the consequences, in essence, could be economic. 4.Standards take a special place among non-tariff barriers. Countries usually impose standards on classification, labeling and testing of products in order to be able to sell domestic products, but also to block sales of products of foreign manufacture. These standards are sometimes entered under the pretext of protecting the safety and health of local populations. Nowadays , with the effort of WTO and other trade organizations, traditional nontariff barriers , like import quota and import licenses, are decreasing. But at the same time, nontariff barriers presents new trend and characteristics. Firstly, strategic anti-dumping has become the major weapon of nontariff barrier. Anti-dumping is part of the WTO regulation, which means it is legal and easy to undertake. So it is adopted by almost all the countries. Recently years, it is notable that developed countries adopted this measure voluntarily, even abuse this measure, making antidumping depart from its original attention of protect fair trade. Antidumping is more of a discriminatory restrict measure than a fair trade protect measure. At present, developed countries are no longer satisfied with using antidumping as a tool to protect domestic market. They are more likely to use strategic antidumping to enhance the competitiveness of their export enterprises. The enterprises which are accused of dumping either spend long time and lots of efforts to fight back, or can do nothing but quit from the foreign market. Those two consequences are what developed countries like to see. At present, developed countries are no longer satisfied with using antidumping as a tool to protect domestic market. They are more likely to use strategic antidumping to enhance the competitiveness of their export enterprises. Secondly, technical barriers to trade has become the main tool of trade protectionism. They take the form of product standards, testing requirements and other technical requirements . Government, market participant can use standards related measures as an effective and efficient means of achieving legitimate, commercial objectives. But when standard-related measures are outdated, overly burdensome, discriminatory or otherwise inappropriate, these measures can reduce competition, stifle innovation, and create unnecessary technical barriers to trade. Developed countries has numerous standard-related measures, and they usually adopt double standards. Thirdly, the limitation on import quantity has targeted highly at one country. This measure is easy and feasible, fast and efficient. Developed countries are more likely to adopt it. They often take advantage of the China-specific safeguard clause that China agreed when China made its accession to WTO. For example, a textile-specific safeguard measure in Chinas World Trade Organization accession agreement allows the United States and other Member countries to impose import quotas on textile and apparel imports from China if they determine that Chinese-origin imports of the targeted products are causing “market disruption.”those measures can bring great concussion to Chinas foreign trade and it is likely to be imitated by other countries. Fourthly, green barriers are expanding their limitation scope. In recent years, owning to the European and American countries green trade barrier is upgrading continuously; after crossing the tariff barrier, there is another non-tariff green trade barrier waiting for developing countries like China there. why Green trade barrier is used with increasing frequency in wider fields, there is a deep-rooted reason behind it. For instance, the world environmental degradation, such as: ozone depletion, global warming, biodiversity loss and other problems whi