Non-tariff Barriers and Trade Flows

During the General Agreement in Tariffs and Trade (GATT) period, trade flows were restricted by many non-tariff barriers (NTBs), namely: subsidies, import licensing, quota, product standards etc. Wiser by the adverse experiences, member countries negotiated for a long time on reform of these NTBs during the Uruguay Round of GATT over 1986-94. As a result of Uruguay Round negotiations, many NTBs were converted into tariff barriers before inception of the World Trade Organization (WTO) in 1995. While this ‘tariffication’ process considerably improved trade openness, various NTBs and behind-the-border (BTB) measured surfaced, with potential adverse effects on trade flows and welfare. The major NTBs in place during the last two decades include the Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT), Pre-shipment inspection and other formalities, Measures affecting competition, Trade-related Investment Measures (TRIMs), Government procurement restrictions, Subsidies and other forms of support, restrictions on Trade in Services etc. In addition, many private sector standards on trade flows from environmental and labour related compliance provisions have come up, with potential consequences on exports from developing countries. Interestingly, a number of regional trade agreements (RTAs) have come up over the last three decades that embody deeper reform commitments, given the greater certainty involved while conducting the cost-benefit analysis involving a limited number of partners.