Difference between Tariff and Non-tariff Barriers.| Tariff barriers are taxes or duties levied on goods traded to/from overseas. On the other hand, non-tariff barriers are barriers to international trade, in addition to tariffs. These are administrative measures implemented by the country’s government to prevent goods imported from abroad and promote goods produced domestically.
Although liberalization expands the scope and opportunities for domestic companies, however, it also poses a threat of competition from foreign companies.
Trade barriers often protect domestic firms by restricting the movement of goods across countries. These barriers are classified into two categories – tariff barriers and non-tariff barriers.
Definition of Tariff Barriers
When two countries trade goods, a certain amount is charged as a fee by the country where the goods are included, thereby providing income to the government and raising the price of foreign goods, so that domestic companies can easily compete with foreign goods. These costs are in the form of taxes or duties, which are called tariff barriers.
The amount of the tax or duty charged as a tariff is added to the cost of the import, which makes the foreign good more expensive, the price of which is ultimately borne by the consumer of the product.
Tariffs are paid to the customs authorities of the country in which the goods are shipped. That includes:
- Export Task
- Import Task
- Transit Duty
- Special task
- Ad-valorem Tugas tasks
- Compound Tasks
- Income Rate
- Protective Rates
- Prevention and Anti-dumping Tasks
- Single column rate
- Double column rate
As we have already discussed, tariff barriers serve a two-fold purpose – on the one hand, they help in increasing government revenues and on the other, they provide protection and support to local industry and companies against foreign competition.
It also facilitates the conservation of foreign exchange reserves. Tariff barriers are often helpful in reducing dependence on international goods and increasing self-reliance.
Definition of Non-Tariff Barriers
Non-tariff barriers refer to non-tax measures used by a country’s government to restrict imports from a foreign country. These include restrictions that lead to prohibitions, formalities or conditions, making importation of goods difficult and reducing market opportunities for foreign goods.
These are quantitative and exchange controls that affect trading volume or price, or both.
It can be in the form of laws, policies, practices, conditions, requirements, etc., that are set by the government to restrict imports.
It therefore covers popular trading irregularities practices such as:
- Import quota
- VER, i.e. Voluntary Export Restraint
- Import license
- Technical and administrative regulations
- Price control
- Foreign exchange regulations
- Import channel
- Consular formalities
- Quantity Restriction
- Pre-shipment inspection
In layman’s terms, non-tariff barriers are barriers to international trade, which can be legal or bureaucratic.
Significant declines have been seen in tariff barriers in recent years, but non-tariff barriers are increasing, particularly in developed countries.
Apart from protecting domestic production and increasing government revenues, there are several reasons to impose tariff and non-tariff barriers which include national security, restrictions, job protection, protection against startups and start-ups, etc.