Cross-country business involves different measures of oversight. These include tariffs and non-tariff barriers. The non-tariff barriers entail regulations that countries put into place to protect local industries from competition. Such provisions are quotas and licensing, foreign exchange restrictions, technical and administrative rules, consular formalities, and State trading. They all affect how cross-border trade functions. Countries like the United States have developed a measure to protect its domestic industries through protectionism. Protectionism in America dates back from the postcolonial period where it was afraid of becoming a producer of agricultural and raw materials instead of manufacturing.
Non-Tariff Trade Barrier
When engaging in trade, there are few obstacles that may hinder smooth operations. They include trade barriers. Non-tariff barriers are the laws that a particular country authorizes to safeguard domestic industries against the foreign competition (Noah, 2018). The regulations include quantity retractions, quotas, and licensing procedures. In this process, the maximum quantity of various products that will be permitted for importation for a particular time is fixed in advance (Shaikh, 2015). The amounts allowed for importation depends on the need and the relationship between the trading countries. However, quotas are included together with licensing to control imports over the quota period. Additionally, they are apportioned to diverse importers and the supplying states.
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Another non-tariff barrier is foreign exchange restrictions. In this system, the importer necessitates ensuring that there is adequate foreign exchange for imported goods by obtaining clearance from exchange control authorities of a particular country (Shaikh, 2015). This has to be done before settling on a contract with a supplier. Moreover, there is technical and administrative regulation affecting trade. It requires imposing on the technical specifications a product has to meet for it to be imported besides observance to specific documentations to regulate imports. This procedure inhibits free trade among countries.
Consular formalities are also types of non-tariff barriers. Notably, many countries stress that shipping documents ought to be accompanied by consular documents such as certified invoices, import certificates, and certificate of origin (Shaikh, 2015). Occasionally they may request the records to be written in a language conversant to the importing countries. Penalties may be enforced when the documents are found not scripted in the language of the importing country. Also, State trading is part of non-tariff barriers. For socialist countries matters, imports and exports are the responsibility of distinct State Agencies. The agencies are mandated to carry international trade rendering to government policies. Lastly, the other non-tariff barrier is a preferential arrangement. This is where member countries negotiate and come up with a preferred tariff rate to conduct trade among them. The set rates are usually lower than the usual tariff rates. They are only pertinent to member countries.
History Of Trade Protection In The United States
Protection of American trade can be traced from the times of the civil war. After the civil war, Congress enforced regulations as a government’s way of increasing revenue and protecting American industry. After the second world war, the United States advocated for trade barriers to be removed in a give-and-take way (Merry, 2016). When Congress adopted the Trade Act of 1974, the aspiration for protectionism began. Moreover, protectionism can be dated from colonial times when America was a British colony. The British government had tried to force its American colonies to supply raw materials to British industries. Consequently, America was deprived of any manufacturing industry on its own. Therefore America’s reaction was due to industrial policy whereby the leading commercial colonies revolted against being forced to perform subordinate roles in the rising Atlantic economy (Fletcher & Ferry, 2011. It leads to tariff being the second bill signed by President Washington after independence.
Subsequently, Congress has the authority to regulate exchange with foreign nations. With Alexander Hamilton being the initial protectionism theorist in America, he was afraid that Britain is a leader in manufacturing would turn America into a producer of raw materials and agricultural products (Fletcher & Ferry, 2011). Although Hamilton’s policies were not adopted immediately, after the 1812 war there was a rush on anti-British impression, disrupted trade and a dire for government to increase revenue. It led to America becoming a protectionist faction. Nevertheless, when the war broke out, Congress doubles the tariffs to an average of 25 percent; thus British manufacturers made the first case of voracious dumping aiming to restrain the foundation of rising manufactures in America. The United States industries survived due to the tariff lobbied to protect it, thus advancing to 35 percent in 1816. By 1820 Americas average tariff was up to 40 percent. Up to date, America is cautious on the imports and exports procedures.
In conclusion, a country needs to have elaborate import and export regulations. This enables it to protect its industries from foreign antagonism. It is essential to note that non-tariff barriers such as quotas and licensing are applied to assorted importers and supplying countries. It is also important to note that the technical specification of products constrains free trade among nations. Additionally, consular formalities also affect how cross-border trade is carried out. Moreover, in some countries, the state is responsible for regulating imports and exports through its distinct agencies. In addition, protectionism in the United States began so that America could protect itself from unfair trade practices. This resulted in increased tariff percentages, therefore, restricting the quantities of imports and exports in the country.
Reference
Fletcher, I., & Ferry, J. (2011). HuffPost is now a part of Oath. Retrieved from https://www.huffpost.com/entry/america-was-founded-as-a_b_713521
Merry, R. (2016). America's History of Protectionism. Retrieved from https://nationalinterest.org/feature/americas-history-protectionism-18093
Noah, D. (2018). 18 Non-Tariff Trade Barriers Exporters Need to Know. Retrieved from https://www.shippingsolutions.com/blog/18-non-tariff-trade-barriers-exporters-need-to-know
Shaikh, S. (2015). Top 6 Types of Non-Tariff Barriers | Managerial Economics. Retrieved from http://www.economicsdiscussion.net/tariffs/top-6-types-of-non-tariff-barriers-managerial-economics/13967
