Difference between Tariff and Non-tariff Barriers
Last Updated :
02 Aug, 2023
Tariff and Non-tariff Barriers are different from each other. Tariff Barriers are the fees charged in the form of a tax or duty. However, Non-Tariff Barriers are the non-tax measures used by the government of a country in order to restrict imports from foreign countries.
What are Tariff Barriers?
When two nations trade in commodities, the country in which the goods are exported levies a tax in order to generate revenue for the government while also raising the price of foreign goods so that domestic firms can compete with foreign products. The fee is in the form of a tax or duty which is referred to as a Tariff Barrier. The amount of tax or duty levied as a tariff is added to the cost of the import, making foreign goods more expensive, which is ultimately borne by the product’s customer. The tariff is paid to the customs authorities of the country where the goods are being sent.
Examples of Tariff Barriers:
- Export Duties
- Import Duties
- Transit Duties
- Specific Duties
- Ad-valorem Duties
- Compound Duties
What are Non-Tariff Barriers?
Non-tariff Barriers are non-tax measures used by the government of a country in order to restrict imports from foreign countries. It includes constraints that result in prohibition, formalities, or circumstances that make imports of commodities difficult and reduce market potential for foreign products. These are quantitative and exchange controls that have an impact on trade volume, pricing, or both. It might be in the form of laws, policies, practices, conditions, and requirements imposed by the government to limit imports.
Example of Non-Tariff Barriers:
- Import Quotas
- VERs, i.e. Voluntary Export Restraints
- Import Licensing
- Technical and Administrative Regulations
- Price Control
- Foreign Exchange Regulations
Difference between Tariff and Non-tariff Barriers
|
Basis
|
Tariff Barriers
|
Non – Tariff Barriers
|
| Meaning |
Tariff Barriers are taxes or fees imposed by the government on imports in order to protect domestic industries and boost revenue for the government. |
Non-tariff barriers include all the limitations other than taxes imposed by the government on imports in order to protect domestic enterprises and discriminate against new entrants. |
| Permissibility |
The World Trade Organisation authorised its members to impose tariff barriers but only at reasonable rates. |
Import quotas and voluntary export barriers were eliminated by the World Trade Organisation. |
| Nature |
Tariff barriers are explicit in nature. |
Non-tariff barriers are implicit in nature. |
| Form |
Tariff barriers are imposed in the form of Taxes and Duties. |
Non-tariff barriers are imposed in the form of Regulations, Conditions, Requirements, Formalities, etc. |
| Revenue |
Tariff barriers generate revenue for the government. |
Non-tariff barriers do not generate revenue for the government. |
| Affects |
Tariff barriers affect the price of imported goods. |
Non-tariff barriers affect the quantity or price or both of the imported goods. |
| Monopolistic Organisations |
As the government charges tariff barriers, monopolistic organisations’ prices can be controlled. |
The monopolistic organisation charges high rates for low output. |
| Profit |
Profits made by the importers can be restricted through tariff barriers. |
Importers can make high profits through non-tariff barriers. |
| Example |
Import Duties, Export Duties, Ad-valorem Duties, etc. |
Import Licensing, Foreign Exchange Regulations, Import Quotas, etc. |
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