The issue of non-tariff barriers (NTBs) has gained prominence in international trade discussions. Recently, US Vice President JD Vance brought into light these barriers during his visit to India, urging the country to provide better access to its markets. Both Indian and American products face NTBs in various countries, complicating trade relationships.
What Are Non-Tariff Barriers?
Non-tariff barriers are trade restrictions that do not involve tariffs. They can hinder the movement of goods across borders. NTBs differ from non-tariff measures (NTMs), which are regulations aimed at protecting health and the environment. While NTMs can be necessary, they become NTBs when they are arbitrary and lack scientific justification.
Impact on Exporters and Importers
NTBs increase costs for traders. Compliance with destination country requirements can be expensive. For instance, Indian exporters may need to pay for laboratory tests mandated by the EU. Additionally, NTBs lead to delays in shipments. Complicated paperwork and strict inspections can slow down the arrival of goods, causing uncertainties for businesses.
Types of NTBs Faced by Indian Exporters
Indian exporters face several challenges due to NTBs. Products like food and agriculture items are often rejected due to high pesticide levels or contamination. The need for inspections before shipment adds to the burden. Furthermore, prior registration with destination countries can be complex and costly.
Major Categories of Non-Tariff Barriers
NTBs can be categorised into various types. One major category involves complex prior registration requirements. Companies often must submit numerous documents and pay high fees to register products. Another category includes unreasonable domestic standards that can hinder exports. For example, the approval process for Indian medicines in Japan is lengthy and complicated.
US Concerns Regarding Indian NTBs
The 2025 National Trade Estimate Report by the US marks several NTBs maintained by India. These include banned items, non-automatic import licenses, and government trading monopolies. Additionally, India imposes Technical Barriers to Trade (TBT) that require mandatory testing and certification.
Barriers in the Services Sector
In the services sector, the US has raised concerns about limitations on foreign investment. Restrictions on foreign equity in financial services and retail sectors are . Barriers to digital trade also affect various services, complicating the landscape for foreign participation.
India’s Response to Non-Tariff Barriers
India is actively addressing NTBs faced by its exporters. The government has raised these issues in bilateral meetings with other nations. Additionally, the Department of Commerce is developing a platform to register NTBs and facilitate their resolution with concerned countries.
Questions for UPSC:
- Examine the impact of non-tariff barriers on global trade dynamics.
- Discuss the role of non-tariff measures in protecting health and the environment.
- What are the implications of foreign investment restrictions in India’s services sector? Analyse.
- Critically discuss the challenges faced by exporters due to non-tariff barriers in international markets.
Answer Hints:
1. Examine the impact of non-tariff barriers on global trade dynamics.
- NTBs increase costs for exporters and importers, affecting pricing and competitiveness.
- They lead to delays in shipments, causing uncertainties in supply chains.
- NTBs often create market access challenges, limiting trade volumes between countries.
- Countries may retaliate with their own NTBs, escalating trade tensions and disputes.
- Overall, NTBs can distort trade flows and hinder economic growth globally.
2. Discuss the role of non-tariff measures in protecting health and the environment.
- NTMs are designed to safeguard human, animal, and plant health through regulations.
- They help maintain environmental standards by controlling harmful substances in trade.
- NTMs can ensure product quality and safety, building consumer trust in markets.
- However, they can become NTBs when overly stringent or arbitrary, impeding trade.
- A balance is needed to protect health while facilitating smooth trade operations.
3. What are the implications of foreign investment restrictions in India’s services sector? Analyse.
- Restrictions limit foreign equity, reducing potential capital inflow and investment opportunities.
- They hinder competition, potentially leading to higher prices and lower quality of services.
- Foreign investment limitations can stifle innovation and technological transfer in services.
- Such barriers may deter international firms from entering the Indian market.
- Overall, these restrictions can slow down the growth of the services sector and impact economic development.
4. Critically discuss the challenges faced by exporters due to non-tariff barriers in international markets.
- Exporters face increased compliance costs due to mandatory certifications and testing.
- Complex registration processes can delay market entry and increase operational burdens.
- Stringent quality standards and inspections can lead to rejection of consignments.
- Market access can be limited by arbitrary regulations that lack scientific justification.
- Overall, NTBs create an unpredictable trading environment, affecting exporters’ profitability and planning.
