Tariff and nontariff barriers as protectionist trade policies

Tariff and Nontariff Barriers

The dawn of globalization and the advancement of transport and communication technology have resulted in increased international trade. As a result, various multinational companies (MNCs) such as General Motors, Coca Cola, and Toyota have expanded their international activities. Because of the stiff competition that local producers face, various governments have embraced protectionist policies with the aim regulating international trade. For instance, the U.S. government imposed quotas on sugar imports in 1982 as part of its interventions in the sugar industry while Japan began restricting automobile exports to the U.S. In 1981 (Batten & Szilagyi, 2011). With increased calls for liberalism fueled by capitalist states, various trade restrictions have been scrapped off to facilitate international trade. This essay analyzes tariff and non-tariff barriers as protectionism policies adopted by various countries.

Tariff Barriers

Tariffs refer to taxes that are imposed on governments on commodities with the aim of controlling economic activities. Tariff barriers are very important because they help in protecting industries from international competition (Heetkamp & Tusveld, 2011). Increased international trade flows have resulted into the near collapse or collapse of local industries. This occurs because of the importation of cheap products that compete with local products in what is commonly referred to as dumping. As such, governments impose tariff barriers to protect budding local industries from stiff competition. Tariffs are also taxed to generate revenue. Taxation is one of the main methods that governments use when collecting its revenues. As such, tariffs imposed on imported goods provide good sources of revenue that can be used to sponsor development projects such as the construction of schools and health centers.

Tariff-rate quotas are also excellent forms of tariff barriers to international trade. Quotas normally involve government restrictions on the quality of commodities that are imported into the state. Tariff-rate quotas set a low tariff for imports of a fixed quantity of a given product and a higher tariff for any imports of the same product that exceed the set quantity (Hanson, 2010). As such, tariff-rate quotas embrace both tariff taxes and quotas. For instance, the United States has set tariff-rate quotas for sugar, beef, dairy products, and peanuts. The initial tariff rate is normally low while the over-quota tariff is normally prohibitive. Explicit import quotas are frequent in the trade of agricultural goods. They normally allow governments to limit the quantity of imports of a given agricultural product and thus plan on a certain import quantity when setting domestic commodity programs (Batten & Szilagyi, 2011). Tariffs may also be imposed on commodities in order to work against trade rule violations made by other states. Lower tariffs thus serve to stimulate competition, trade, and reduction of commodity prices.

Analysis between tariff and nontariff barriers

Whereas tariff taxes are essential to generate revenue and protect local industries from international competition, they have numerous setbacks. Evidently, tariffs increase the economic cost for domestic consumers who have to pay higher prices to import competing goods. As such, tariff taxes are an economic burden on consumers who have to shoulder the tax. Secondly, tariffs also serve to burden the economy through the wasteful allocation of resources to the import competing domestic industry. This necessitates the numerous negotiations under the General Agreement on Tariffs Trade to lower tariffs on manufactured goods (Hanson, 2010).

Heetkamp and Tusveld, (2011) showed that tariff and non-tariff barriers imposed on pharmaceutical products increase the cost of pharmaceuticals and limits access to essential drugs targeting the poor. As such, minimizing tariffs on certain commodities such as drugs increases the private and public sectors purchasing power. This later increases the availability and affordability of essential drugs (Heetkamp & Tusveld, 2011).

Non-tariff barriers are often discriminating policies. This is because states normally impose them on imports of a certain commodity in a given country, but not on imports of the same commodity from another state. As such, non-tariff barriers often serve to restrict the importation of certain imports based on their country of origin. In fact, exports from Third World Countries to industrialized countries are affected by non-tariff barriers largely than trade among industrialized nations. This often widens the gap between developing countries and developed countries, thus propagating global inequality. In addition, agricultural products are largely affected by non-tariff barriers. This also propagates global inequality because developing countries largely rely on agricultural products.

However, non-tariff barriers are preferred over tariffs because policy makers and proponents of protectionist policies believe that the effects of tariffs are often unpredictable (Batten & Szilagyi, 2011). In addition, GATT's measures to restrict the use of tariffs forced many policymakers to embrace non-tariff barriers. An analysis of both tariff and non-tariff barriers to trade indicate that non-tariff barriers tend to propagate discrimination and global inequality. As such, these policies should be applied sparingly to promote trade.

Conclusion

Many governments use non-tariff and tariff barriers to regulate economic activities within their state confines. Unfortunately, while these barriers tend to protect local industries and generate revenue, tariffs have often been faulted for their inadequacies. This has resulted into numerous international negotiations such as GATT with the aim of lowering tariffs among member states. In addition, countries have resorted into regional trade agreements and free trade areas to circumvent certain tariffs. On the other hand, non-tariff barriers bear the largest blame for inadequacies. While both policies aim at regulating economic activity and protecting local industries from stiff international competition, it is pertinent that both policies be used sparingly to promote international trade and interstate relations (Heetkamp & Tusveld, 2011).