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The advent of the World Trade Organisation (WTO) has led to a substantial decrease in the level of t
The advent of the World Trade Organisation (WTO) has led to a substantial decrease in the level of tariffs applicable to member nations. Nevertheless, there has been a concurrent rise in the number of non-tariff measures which is significantly hampering trade. Discuss.
Non tariff measures
Types of NTM
Impacts of NTM
Government Implementation
Measures
Concrete e.g
Govt vs Private Sector
1. WORLD TRADE ORGANISATION (WTO)
Based on a trading system which dated back to the end of the World War II, the WTO was established in 1995. It is a non-profit organisation dealing with global rules of trades in view of ensuring smooth trade flows amongst nations. The WTO became the legal successor to the General Agreement on Tariffs and Trade (GATT) which was responsible for trade in goods only; the WTO on the other hand also encompasses trade in services and intellectual properties like inventions, designs and creations (VanGrasstek, 2013).
The WTO binds its member countries (currently 160 members) through agreements which are ratified by the respective members’ parliaments after negotiations. These agreements aim at regulating international commerce so as to help producers, importers and exporters in conducting their business which consequently stimulate global economic growth and development (Steger, 2009).
2. TARIFF
Tariffs are undoubtedly one of the oldest forms of intervention by the government in economic activities. Tariffs are simply taxes or customs duties on imported goods and are imposed for two distinct economic purposes. The first reason for implementing tariff is to generate revenue for the government and secondly it is to protect and encourage domestic firms from the fierce competition of foreign imports (Sumner et al., n.d).
One of the activities of the WTO is to reduce or eliminate potential barriers to trade and to negotiate on rules regulating the operation of international trade for example: product standards and antidumping laws amongst others (WTO, 2014). As a result, there has been a significant decrease in the level of tariffs amongst member nations.
Gains from international trade are too a great extent dependent on the absence of trade restrictions, however the reductions in tariffs was increasingly replaced by non-tariff measures (NTMs) internationally.
3. NON TARIFF MEASURES
According to World Bank (2008), non tariff measures are described as the quantitative limitations and explicit restrictions that act as a hindrance to trade. They are policy measures that can have an economic effect on international trade of goods or altering quantities being traded (UNCTAD, 2013). NTMs encompass a wide range of policies that are implemented to reduce imports and thus benefits local producers (Coughlin & Wood, 1989).
Quambusch (1997) stated that NTMs can be classified into 3 major sections according to their degree of influence which are:
3.1 Government
The government has the greatest influence on NTMs through the establishment of legislations. Legislative protectionism includes sanctioning of protectionist influences on international trade, whether the measures impinge on prices or quantitative limitations and regulations recommending the utilization of local products in favor of foreign products.
3.2 Administrative Protection
The second section involves the executive to take political action within the administrative sphere and therefore called administrative protection. Characteristics such as protective regulations providing for the safety of consumers, safeguard of human, animal and plant life and health, copyright protection, and safety regulations are incorporated under this section. Other aspects entail procedures for the issue of import and export licenses, customs clearance and regulations on the levying of anti-dumping and countervailing duties. Classic instruments of administrative protectionism include equivocation, concealment and inconsistencies among purely discretionary decisions and secret government directives to arbitrary acts by the executive (Jordann, 2013).
3.3 Private Groups and Organisations
The last section consist of private groups and organisations for example trade associations and trade unions which resort to discriminatory practices against foreign competitors and is called emotional protectionism. The most prominent pertains to public tenders and appeals to buyer’s patriotism to appeals for boycotting foreign products (Jordann, 2013).
4. TYPES OF NON TARIFF MEASURES
4.1 Product Standards
Product standards are about the different characteristics of a product principally involving the quality, safety and fitness for purpose of the products being imported. If a product being imported does not conform to the established standards in a country, the product will not be allowed in that particular country (Shepherd, 2007). For example, in Mauritius it is the Mauritius Standards Bureau which is in charge for controlling the standards of various imported products.
4.2 Product Labelling
Countries often insist on specific labeling of imported products where important information such as date of production and expiry, ingredients, country of origin amongst others have to be included (ECU, 2005). Such measures tend to discourage exporters as labeling can be burdensome and costly. For example: the labeling policy on meat in the United States makes it mandatory for labels to include information on the origins of the meat as well as where the animal was reared, butchered and processed (CBC News, 2013).
4.3 State Trading
According to Loyd (1981), state trading occurs when a trading organisation is established as part of the government policies to control and regulate the quantity and price of international trade of commodities. The imports and exports of certain items are channeled through state trading enterprises and as such there are no individual exporters or importers of those kinds of items (McCorriston & MacLaren, 2012). For example, in Mauritius, the State Trading Corporation is responsible for the imports of petroleum products, Liquefied Petroleum Gasand non-Basmati Rice (STC, 2014).
4.4 Preferential Trade Arrangements (PTAs)
PTAs allow nations forming trading groups to grant preferential terms in terms of trade amongst themselves (Baccini et al., 2011). In so doing, imports from member countries face a reduction in tariff barriers while non-member countries are subject to a multiplicity of tariffs or regulations. The idea behind PTAs is to foster international cooperation, increase trade as well as economic growth and development for all member countries (Bhagwati & Panagariya, 1996). Mauritius forms part of the South African Development Community (SADC) and hence benefits from duty free imports from the other 14 member countries of the SADC (ION News, 2014).
REFERENCES
- BACCINI, L., DÜR, A., ELSIG, M., AND MILEWICZ, K., 2011. The Design of Preferential Trade Agreements: A New Dataset in the Making.
- BHAGWATI, J. AND PANAGARIYA, A., 1996. The Theory of Preferential Trade Agreements: Historical Evolution and Current Trends. The American Economic Review, 86 (2).
- CBC NEWS, Canada threatens U.S. with tariffs over meat-labelling rules, Canadian Press [online]. Available from: http://www.cbc.ca/news/business/canada-threatens-u-s-with-tariffs-over-meat-labelling-rules-1.1335949 [Accessed 5 August 2014].
- COUGHLIN, C.C., AND WOOD, G.E, 1989. An Introduction to Non-Tariff Barriers to Trade.
- EXPORT CONSULTANCY UNIT (ECU), 2005. Labeling, Marking & Packaging Regulations.
- ION NEWS, 2014. All imports from SADC countries now duty-free for Mauritius [online]. Available from: http://ionnews.mu/imports-sadc-countries-duty-free-mauritius/ [Accessed 6 August 2014].
- JORDANN, A.C, 2013. Non-Tariff Measures, The New Frontier Of Trade Policy? In: 3rd International Conference on International Trade and Investment Mauritius, 4-6 September 2013.
- LOYD, P., 1981. State trading and the theory of international trade. St. Martines Press. New York.
- MCCORRISTON, S., AND MACLAREN, D., 2012. State Trading Enterprises as Non-Tariff Measures: Theory, Evidence and Future Research Directions.
- Quambusch, L. 1977. Non-tariff Barriers to Trade. Intereconomics. No. 3/4.
- SHEPHERD, B., 2007. Product Standards, Harmonization, and Trade: Evidence from the Extensive Margin. World Bank, Washington, DC.
- STATE TRADING CORPORATION, 2014 [online]. Available from: http://stc.intnet.mu/. [Accessed on 5 August 2014].
- STEGER, D. P., 2009. Redesigning the World Trade Organization for the Twenty-first Century. International Development Research Centre and the Centre for International Governance Innovation.
- UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD), 2013. Non-Tariff Measures To Trade: Economic and Policy Issues for Developing Countries.
- VANGRASSTEK, C., 2013. The History and Future of the World Trade Organization. WTO Publications.
- WORLD BANK, 2008. Non-Tariff Measures on Goods Trade in the East African Community. Synthesis Report. Report No. 45708-AFR, Africa Region, the World Bank
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