Non-Tariff Barriers: Characteristics, Types and Examples in Mexico

The no duty barriers they refer to the restrictions resulting from prohibitions, conditions or specific market requirements, which make it difficult and / or costly to import or export products. They are a way to restrict trade using mechanisms other than the simple imposition of tariffs or taxes.

These barriers can take the form of import quotas, licenses, certificates of origin, embargoes, sanctions, customs delays, technical barriers or other systems that impede or minimize trade. Developed countries often use them in international trade to control trade with another economy. They are usually based on the availability of goods and services, and on political alliances with the countries with which they trade. In general, any barrier to international trade will influence the economy because it limits the functions of standard trade in the market. The income lost as a result of the barrier is called economic loss.

characteristics

Developed countries have moved from tariffs to non-tariff barriers because these countries have other sources of income than taxes.

Historically, when governments were being formed, governments had to obtain funds, and they began to receive them with the introduction of tariffs. This explains why most developing countries still depend on these as a way to finance their expenses.

Developed countries can afford not to depend on tariffs, while developing non-tariff barriers as a way to regulate international trade.

Non-tariff barriers can be used to support weak industries or compensate industries that have been negatively affected by the reduction of tariffs.

The notoriety of non-tariff barriers is the ability of certain interest groups to influence the process, given the impossibility of obtaining government support in setting tariffs.

Reduction of tariffs

Tariffs for the import of goods were reduced during the negotiation rounds in the World Trade Organization (WTO) with the General Agreement on Tariffs and Trade. After the reduction of tariffs, the principle of protectionism demanded the introduction of new non-tariff barriers, as technical barriers to trade.

According to statements made at the United Nations Conference on Trade and Development (UNCTAD 2005), the use of tariff barriers - based on the quantity and control of price levels - decreased significantly from 45% in 1994 to 15% in 2004, while the use of other non-tariff barriers increased from 55% in 1994 to 85% in 2004.

Types

Countries can establish different types of non-tariff barriers with a wide variety of trade restrictions. Here are some types:

Licenses

The government issues permits for the import and / or export of products included in an official list of licensed goods. The licenses can be:

- Allow to import and / or export the products included in the list during a certain period of time.

- Be unique. For a certain company to import and / or export a certain amount of products, with the cost and country of origin and destination already defined.

Import fees

Import quotas are set to limit the amount that a product can be imported or exported during a certain period. The objective of quotas is to limit the supply of certain products, which generally increases their prices and allows local companies to capitalize the unmet demand.

Quotas are also established to avoid dumping , which occurs when foreign producers export products at prices lower than their production costs.

Embargoes

The embargo is the most severe type of quota, since it totally prohibits trade. You can impose embargoes on the export of all or certain products that are sent to specific countries. Although the embargo is usually made for political purposes, its consequences are economic.

Other types

- Countries usually impose rules on classification, labeling and testing of products to allow their sale domestically, as well as to block the sale of foreign-made products.

- The restrictions and control of currencies occupy a special place among the non-tariff regulatory instruments. The exchange restrictions establish the regulation of transactions with currency and other monetary values.

- Countries impose sanctions on others to limit their commercial activity. Sanctions may include both specific administrative actions and additional customs and commercial procedures that limit a country's trade capacity.

- Governments can help domestic companies compete by providing subsidies, which reduces their cost of production and allows them to generate profits by achieving lower prices. Examples are agricultural subsidies in the United States. UU

Examples in Mexico

Minimum reference prices

Companies face certain non-tariff barriers when exporting to Mexico. In 1992 Mexico published a list of products, establishing for such goods an estimated minimum price, also known as the"reference price".

However, a resolution published in 2009 abolished these estimated minimum prices in all industries, with the exception of used cars.

Import licenses

Certain products must obtain an import license, the difficulty of which varies according to the nature of the product. Periodically, the Mexican government publishes lists with articles that have a specific import control.

The following are examples of import licenses required by the Mexican government agencies that administer these particular licenses.

- The Ministry of Economy requires licenses for used products and reconditioned equipment, among others.

- The Ministry of Agriculture requires a prior import authorization for some leather products and frozen meat, among others.

- The Ministry of Health requires a"prior sanitary import authorization"for medical products and equipment, pharmaceutical products, toiletries, processed foods and certain chemical products. In some cases, only pharmaceutical companies are authorized to import them.

- The Ministry of the Environment requires licenses for products manufactured from endangered species, such as certain eggs, ivory, some types of wood, skins, etc.

- The Ministry of Defense requires an authorization to import arms, ammunition, explosives and defense equipment.

Steel products

Since 2014, Mexican customs began to demand more information about steel products. Importers are required to submit detailed information about the material before arrival at customs.

A certificate of quality of the material must be presented, issued by the steel plant from which it was obtained.

Since 2017, steel importers must also be registered in the Sectoral Promotion Programs for the steel industry.

Products associated with health

In the case of goods for health, products manufactured abroad must have a legal representative in Mexico; They must be registered with the Ministry of Health before being sold in the country.

Textile products

Importers of textile products must be registered in the Official Register No. 11 for the textile and clothing sector.

References

1. Investopedia (2018). Commercial Policy. Taken from: investopedia.com.
2. Wikipedia the free encyclopedia (2018). Trade barrier. Taken from: en.wikipedia.org.
3. Globaltrade (2010). Trade Barriers in Mexico. Market Research Report. Taken from: globaltrade.net.
4. Wikipedia the free encyclopedia (2018). Non-tariff barriers to trade. Taken from: en.wikipedia.org.
5. Guillermo Westreicher (2018). No duty barriers. Economipedia. Taken from: economipedia.com