Barriers to Trade

Prof. Dr. Lepi T. Tarmidi

Department of Economics, University of Indonesia

October 2007

Barriers to Trade

1. Tariff

Before the GATT Uruguay Round, average tariff rate in developed countries was already relatively low, around 8%. After the GATT Uruguay Round/WTO, the average tariff rate further declined to 5.6%. Hence tariff protection is not important any more, except in agriculture. Besides, developed countries offer tariff cuts to imports from developing countries under the Generalized System of Preferences (GSP). On the other hand, developed countries practice tariff escalation, the more advanced the production process the higher is the tariff rate.

The European Union (EU) imposes a tariff rate of 12 % for imports of canned tuna from Indonesia if the volume is within the quota limit for GSP, but in excess of it the rate increases to 24 % (Kompas, 15 June 2005).

Since tariffs are not an effective instrument of trade protection anymore, developed countries now refer to other measures known as "non-tariff barriers".

2. Non-tariff barriers

Since tariffs as a mean of protection has lost much on importance, non-tariff barriers gain more on importance for developed countries. The following is not a complete list.

a. Quantitative restrictions or quota

No longer allowed under the Uruguay Round, except for the Multifiber Arrangement (MFA), which will be phased out until January 1, 2005.

Protection is not eliminated, because countries can substitute the same level of protection with tariffs. The reason is because quantitative barriers are bilateral and hence are not transparent, while tariffs apply to all countries without discrimination and are hence transparent and can be negotiated downwards