Tariff barriers are duties imposed on goods which effectively create an obstacle to trade, although this is not necessarily the purpose of putting tariffs in place. Tariff barriers are also sometimes known as import restraints, because they limit the amount of goods which can be imported into a country. Many organizations which promote trade are concerned about both tariff and non-tariff barriers to free trade, and a number of nations have agreed to radically reduce their trade barriers to promote the exchange of goods across their borders. A number of different types of duties can be levied when goods cross international boundaries. With an ad valorem duty, for example, the importer must pay a fee which is calculated as a percentage of the value of the goods being imported. Specific tariffs are set amounts which are levied on products which are imported, regardless of values, while environmental tariffs penalize nations with poor environmental records. For importers, tariff barriers can make it difficult to bring goods into a country. The importer may be forced to import less because the tariff barriers cannot be afforded otherwise, and it may need to charge more for the goods to make importing worthwhile. Tariffs are designed to force importers to do this to level the field between domestic producers and importers, allowing costly domestic producers to compete with importers who may be able to bring in goods at lower cost.
Types of Tariffs
A tariff may be one of the following four kinds:
(1) Ad valorem (2) Specific
(3) Alternative (4) Compound
1. Ad Valorem duty
The kind most commonly used, is one that is calculated as a percentage of the value of the imported goods - for example, 10, 25 or 35 per cent. This may be based, depending on the country, either on destination (c.i.f.), or on the value of the goods at the port in the country of origin (f.o.b.).
2. A Specific duty
Is a tax of so much local currency per unit of the goods imported (based on weight, number, length, volume or other unit of measurement. Specific duties are often levied on foodstuffs and raw materials. 3. An Alternative duty
Is where both an Ad valorem duty and a Specific duty are prescribed for a product, with the requirement that the more onerous one shall be Ad valorem duty value plus 10 cents per kilo. 4.Compound duties
Are imposed on manufactured goods that contain raw materials that are themselves subject to import duty. The "specific" part of the compound duty (called compensatory duty) is levied as protection for the local raw material industry.
Non Tariff Barriers:
(NTBs) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures and countervailing duties, which, although 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, sanitation, or 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 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...