RokStories International trade has grown exponentially over the past half-century benefiting American companies, communities and workers. This primarily is the result of the spread of globalization, improvements in technology, finance and transportation, and importantly, reductions in country tariff levels. But, as tariff levels have declined, new forms of protectionism have emerged that could threaten global economic and U.S. corporate growth.

Collectively known as non-tariff barriers to trade (NTBs), analysts say these restrictions are the main culprit in the stalling of the Doha Development Round, the current World Trade Organization (WTO) trade negotiations which began in 2001. The round essentially came to a halt in 2008 due to disagreements on the future of NTBs, including agricultural subsidies, international standards, and trade rules for services. But NTBs can take a variety of forms, such as specific limitations on import quantities, onerous customs and administrative entry procedures, and standards and regulations that are difficult to understand and satisfy.

Simply put, NTBs are designed to limit imports by increasing the costs of international business. And setting physical limits on import quantities, creating price floors, and establishing barriers to entry are typical NTB mechanisms. Fortunately, they often are relatively easy to identify and possible to avoid. Other strategies to limit trade often involve import licensing requirements, proportion restrictions of foreign to domestic goods, embargoes, special supplementary duties, and border taxes.

Entry Procedures and Abuses

The customs agencies of many countries are becoming an increasing burden to corporations interested in global expansion. Of course, the stated aim of these agencies is to protect the home country from global threats, both physical and economic. But sometimes implementing creative anti-dumping policies and establishing new tariff classifications, documentation requirements and administrative fees only serve to unfairly reduce competition.

The use of anti-dumping policies, which protect domestic markets by raising prices on imports priced below-cost, have been especially notorious in recent years. In fact, legitimate instances of dumping are few and far between. Instead, dumping often is used as an excuse to limit international competition and bolster domestic industries. And today, the threat of dumping can come at any time and lead to significant losses.

For example, the U.S. Commerce Department recently imposed anti-dumping tariffs ranging from 31 percent to 250 percent on Chinese solar product imports. Whether this means that Chinese companies actually are dumping their goods or that the United States is using protectionist measures is yet to be seen.

Government Manipulation and Market Distortion

As international business and global supply chains have become more complex, governments have become more sophisticated at manipulating trade. This has led to price distortions and market inefficiencies. In turn, one of the biggest problems in international trade is the tit-for-tat positions governments often take in an attempt to one-up each other. Thus, trade restrictions beget more restrictions, causing trade wars that can exact a large cost to both industries and consumers.

For example, as a result of U.S. tariffs placed on Chinese solar products, the Chinese government has retaliated by accusing U.S. manufacturers of dumping polysilicon, the most costly material in solar cell production. These actions will inevitably cause costs to rise in the solar industries of both countries, creating a lose-lose situation for everyone involved.

Becoming familiar with trade relations between the United States and target country markets, and closely monitoring events and procedures, can be an effective means to protect your business from costly trade manipulation. And this may take the shape of government procurement policies, export subsidies, countervailing duties, domestic assistance programs, orderly marketing agreements, and voluntary export restraints.

Ambiguous Standards and Regulations

Standards and regulations often are not well defined, pose real challenges and are difficult to overcome. Thus, while a good may be perfectly acceptable in one country, it may not meet the minimum criteria necessary for sale in another.

Consequently, problems often arise regarding packaging and labeling requirements, and testing methods. But the abuse of standards and regulations can take many forms, simply serving as an obstacle to trade and investment.

Monitor and Strategize

As non-tariff barriers grow more prevalent and complex, businesses must learn to adapt. Strategies that continuously identify new trade barriers and establish creative ways around them are essential. The U.S. Department of Commerce offers a wide variety of services that can help U.S. firms avoid these pitfalls.

Importantly, to come to a successful completion of the Doha Round, American companies must support and work closely with U.S. trade negotiators, and provide up-to-date examples of foreign non-tariff barriers. In turn, the rules of the global game can be made more free and fair. And this is essential since international trade has expanded at an average annual rate of 6 percent since 1950, and as a result, now contributes approximately $1 trillion to U.S. gross domestic product and supports one in five American jobs.

 This article appeared in Impact Analysis, December 2012.

Matthew Hayes
About The Author Matthew Hayes
Matthew Hayes is an analyst at Manzella Trade Communications, a strategic communications and public affairs firm focusing on international business, and a student of political science and economics.

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