Each state seeks to develop national industry. But how is this best done? The dispute between advocates of protectionism and free trade has not stopped for centuries. At different time periods, leading states leaned in one direction or another. There are two ways to control export-import flows: customs duties and non-tariff regulation measures. The latter will be discussed in the article.
Classification of non-tariff measures
National trade policies may be protectionist, moderate, or open (free). This division into groups is quite relative, but significantly helps in the analysis. To determine the rigidity of trade policy, not only duties and quotas are taken into account, but also non-tariff regulation measures introduced by the country. Moreover, it is the latter that are much more difficult to notice and evaluate, which is why they are so popular today. The following non-tariff regulation measures are distinguished:
- Quantitative. This group includes voting (contingenting) of imports, licensing of incoming and outgoing goods flows and the so-called “voluntary” export restrictions.
- Hidden measures of non-tariff regulation. This group includes public procurement, the presentation of requirements for the content of local components, the introduction of technical barriers, taxes and fees. Hidden measures of non-tariff regulation are aimed at regulating imports.
- Financial. This group includes subsidizing, lending to national producers and dumping. Financial methods serve to regulate exports.
This ends the economic measures of non-tariff regulation. Separately, it is necessary to highlight legal instruments that are closely related to international trade.
Measure non-tariff methods
Quantitative, hidden, and financial constraints are poorly assessed, and therefore they are often poorly displayed in statistics. However, several indices are usually used to measure non-tariff methods. Among the most famous:
- Frequency index. It shows how much of the heading is covered by non-tariff measures. The advantage of this indicator is the ability to evaluate the level of restrictions with it. However, it will not allow measuring the relative importance of the measures applied and their impact on the economy.
- Trade coverage index. This indicator characterizes the value share of exports and imports, which are subject to non-tariff restrictions. Its disadvantage is that it usually underestimates the impact of intense non-tariff barriers.
- Price Impact Index. This indicator shows how the introduced non-tariff measures affect the economy. It characterizes the ratio of world and domestic prices for goods. The disadvantage of this index is that it does not take into account the fact that the market value is affected not only by the introduction of non-tariff measures, but also by many other factors.
The most common methods
Direct quantitative restrictions are an administrative form of non-tariff government regulation of trade flows, which determines the amount of goods allowed for export or import. You need to understand that the quota introduced becomes a limitation only when it is reached. The tariff is always valid. Often governments give preference to quotas. This is due to the fact that it is much easier to immediately set a threshold volume than to calculate what tariff will lead to the export or import of a given quantity of goods. Quantitative restrictions can be introduced both by decision of the government of one country, and on the basis of international agreements that govern the trade in certain products. These include quotas, licensing and “voluntary” export restrictions.
Quotas
Methods from the first subgroup are used most often. Quota and contingent are synonymous concepts. The only difference is that the second is a touch of seasonality. A quota is a quantitative non-tariff measure, implying the restriction of imports or exports by a certain volume (amount). It is superimposed for a certain period of time. In terms of focus, quotas are export and import. The former are usually introduced in accordance with international agreements or with a shortage in the domestic market. Imported are aimed at protecting the national producer and maintaining a positive trade balance. In terms of coverage, global and individual quotas are distinguished. The former are superimposed on the export or import of a particular product, and its origin is not taken into account. Individual quotas are imposed within the global framework and specify the country.
Licensing
This type of quantitative constraint is closely related to quotas. Licensing involves the issuance by the government of special permits for the export or import of a certain amount of goods. This procedure can be performed both separately and within the framework of quotas. There are several types of licenses:
- One-time. It involves permission for one transaction, which is valid for no more than a year.
- General license. This permission is without the number of transactions, but which is valid for no more than a year.
- Automatic license. She issues immediately, and the application cannot be rejected by state authorities.
“Voluntary” export flow restrictions
Large states have many levers of pressure on weaker countries. A “voluntary” export restriction is one of them. A weak country harms it, actually protecting the national producer of a large state. Its action is similar to import quotas. The difference is that one state imposes a restriction on another.
Hidden methods of protectionism
There are a huge number of measures that can be attributed to this group. Among them are:
- Technical barriers. They are administrative rules and regulations that are designed to discourage the import of foreign goods.
- Taxes and fees in the domestic market. They are aimed at increasing the price of foreign goods in order to reduce its competitiveness.
- Public Procurement Policy. This type of hidden mechanisms of non-tariff regulation involves the establishment of obligations to purchase certain goods manufactured on the national market.
- Content requirements for local ingredients. They imply the establishment of a share of the final product for sale on the domestic market of the country, which should be manufactured by national manufacturers.
