Week 6: Regulatory Barriers Flashcards
Common Justifications for Regulations / Interventions in Trade
- National Defence
- Infant Industry
- Maintenance of Jobs
- Strategic Trade
- Political Purpose
Examples of Export Control
National defence imperative
- E.g. US has strict rules on certain high-tech exports
Preserve scarce national resources / stabilise domestic markets
- E.g. Japan restricts timer export
Protect cultural / natural heritage
- Egypt restricts antique exports
Trade sanctions
- Trade embargo against South Africa during apartheid period
Quality control to protect national reputation
- E.g. meat industry
Fulfilment of requirements
- E.g. ensuring that transhipment / goods for re-exports are exported
Who Benefits from Regulatory Barriers?
- Local businesses
- Domestic private interests
- Political parties
- Consumers
- Government
Regulatory Impact on Foreign Businesses
- Export may incur additional costs in market entry
- Exporters may need to compete unequally
- Export entry may be restricted or totally prohibited
- A business may risk the loss of its unique competitive advantage
- A business may adopt an entry mode with reduced control / have to share profits with a local business
Why Regulatory Barriers Arise and Persist
- Predicting change / continuity
- Lobbying for change / exceptions
- Choosing a local partner
- Minimising dangers
Foreign Firms Facing Regulatory Barriers / Challenges are Required to:
- Identify them in export plan
- Understand reasons
- Construct a response – political / economic
- Cultivate influential support
Harmonised System (HS)
- Provides a standardised basis for product classifications
- Used in over 98% of merchandise in world trade
- Used for determining tariffs rates / collecting international trade statistics / trade negotiations
- Tariff Barrier (4 Major Forms)
- Ad valorem tariff – a % of value is taken
- Fixed tariff – fixed per unity of quantity (e.g. cigarettes)
- Compound tariff – ad valorem + fixed
- Alternate tariff – compound but with option to choose
(Tariffs raise revenue for the gov.)
- Non-Tariff Barriers (NTBs)
- Quotas
- License
- Export Controls
- Other Non-Tariff Barriers
- Product / testing standards
- Regulatory / currency controls
- Investment and ownership controls
Technical Barriers to Trade
- Constitute about 2-10% of overall production costs
- Set out specific characteristics of a product e.g. size / shape / design / functions or the way it’s labelled / packaged
- Conformity with technical regulations mandatory (cannot be sold if requirements are not met)
- Conformity with standards voluntary (can be sold but may impact consumer choice)
Technical Regulations Aim to Achieve:
- Protection of human safety / health
- Protection of animal / plant life or health
- Protection of the environment
- Prevention of deceptive practices
Cost for Exporters in Ensuring Compliance
- Conformity assessment costs e.g. testing, certification, inspection
- Information costs e.g. costs of evaluation, dissemination of relevant information
- Production costs e.g. adjustment of production facilities, additional production expenses
Types of Regulatory Barriers (Services)
Explicit restrictions / Licensing / Bans / Visa
