Experts affirm the role and importance of international trade in increasing the wealth of a country and it’s GDP. Therefore, there is a relationship between the economic growth of a country and free trade.
International trade, also known as foreign trade, is what encompasses the purchase and sale of goods and services between different countries and their markets. But today we can no longer speak only of strictly commercial relationships. New technologies have globalized the planet, and cultural and political relations have also reached a world level.
Although most countries believe in the importance of international trade to increase their economy, there are still countries that restrict the free movement of goods depending on which goods. These measures affect competitiveness between companies, sometimes positively, but often negatively.
Barriers against international trade
States tend to apply these barriers for several reasons. One of them is the benefit that the collection of taxes from these trade barriers brings to the state. Another reason is to reduce imports and thus improve the country’s trade balance. There are also countries that use trade barriers to protect national production from foreign companies, the so-called “protectionism”. Next, we explain the two types of trade barriers that exist and the ones most used by states to regulate trade.
Customs barriers
Tariff barriers are a set of restrictions used by different countries at the tax level. These barriers are taxes applied to goods that are imported into a specific country. Although tariffs can also be found in exports, they are less common.
Although India has some schemes such as the EPCG Scheme (Export Promotion Capital Goods Scheme) that is also well known as zero duty EPCG scheme under which allows businessmen to import the capital goods or machinery free of customs duties and this will help in producing the high-quality services and products. The imported machinery or capital should be utilized in the production of such goods that is to be export.
There are different types of tariffs:
- Specific tariff: Tax that is imposed according to the quantity of the merchandise, it is fixed according to the units that are wanted to import a product.
- Mixed tariffs: The two types of tariffs mentioned above apply.
- No duty barriers
They are all those trade policy measures other than tariffs that hinder the free movement of goods and services to reduce imports. They can take multiple forms, but here are some examples of the most commonly used barriers to protect domestic products while collecting taxes:
- National content requirements: The government requires that a part of the final product be produced in the country itself.
- Tighter sanitary and phytosanitary barriers for foreign products, such as:
- Labeling, packaging, and container requirements
- Residue tolerance limits
- Hygiene requirements
- Administrative barriers: Bureaucratic rules, requirements, and application for import licenses to hinder and complicate trade.
- Quantitativeor contingent restrictions: Limitation of imports by establishing a number of units or maximum values.
- Financial aidto national production to reduce imports.
- Anti-dumping measures: control and set minimum entry prices with additional charges and taxes.
- Restrictionson distribution or after-sales services.
- Import prohibition ofcertain products can be complete or temporary, depending on the reasons for the country.
One of the relaxations given to the businessmen in India under the Advance Authorisation Scheme under which a businessman can import the raw material required for the manufacturing of export goods as duty-free.
There are certain other Schemes in India under which the GST and import Duties are exempted or refunded for the raw material. The scheme was earlier MIES scheme but now replaced by RoDTEP Scheme as the former was not in compliance with WTO.
