Non-tariff barriers

Also called: NTB · Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Class 11, Ch 3 "Liberalisation, Privatisation and Globalisation: An Appraisal"

Meaning

Non-tariff barriers (NTBs) are any government restrictions on trade other than tariffs (a tariff is a tax on imports). They include quotas, import licences, strict product standards and slow customs procedures.

They matter because a tariff is easy to see and measure, but many NTBs are hidden inside rules and paperwork. As GATT and the WTO pushed tariffs down, NTBs became the main tool of protection. Some call this the "new protectionism".

Explanation

Three types of NTBs

• Quantity-based: these limit how much of a good can come in.
• Import quota: a limit on the quantity or value of a good that can be imported over a period.
• Quantitative restrictions (QRs): direct limits on imports or exports, such as bans, quotas and licences.
• Import licensing: the government must give permission before a good can be imported.

• Voluntary export restraint (VER): the exporting country "agrees" to limit its own exports, usually because the importing country pressures it to.

• Standards-based: these are rules on how products must be made, tested or labelled.

• SPS measures (sanitary and phytosanitary): these protect human, animal and plant health from food-safety risks, pests and diseases.

• TBT (technical barriers to trade): these are technical rules, standards, labelling and conformity assessment (testing and certifying that a product meets a standard).

• Procedural: these are slow customs clearance, repeated inspections and too many documents. Trade facilitation (making customs simpler, faster and the same across countries) tackles this group.

How a quota raises prices: a worked example

• Starting point: at the world price of ₹100, Indians want 10 lakh toys. Domestic makers supply 4 lakh, so 6 lakh would be imported.
• The quota: the government allows only 2 lakh imported units.
• Supply is now short, so the domestic price rises, say to ₹130.

• At ₹130, people buy less and domestic makers produce more, until the gap is exactly 2 lakh.

• Quota rent: the ₹30 gap between the domestic price (₹130) and the world price (₹100).

• On 2 lakh units this is ₹60 lakh.

• This money goes to whoever holds the import licence, not to the government.

• Tariff comparison: a ₹30 tariff would give the same ₹130 price, but the government would collect the ₹30 as revenue.

• Why this matters: this is why economists prefer tariffs to quotas. Under the WTO farm rules, tariffication meant turning quotas into equivalent tariffs.
• Quotas are also one reason prices differ between countries, so purchasing power parity (PPP) does not hold exactly (Class 12).

WTO rules on NTBs

• GATT Art. XI generally bans QRs.

• The main exception is Art. XVIII:B. It lets a developing country limit imports when it faces balance-of-payments (BoP) difficulties, meaning it is short of foreign exchange.

• VERs are "grey-area" measures because on paper they avoid GATT rules. Article 11 of the WTO Safeguards Agreement now prohibits them.

• Classic case: from 1981, Japan limited its car exports to the US. Japanese firms responded by moving to costlier models and building factories in the US.

• SPS Agreement:

• Measures must be science-based and backed by a risk assessment (a study of how likely the harm is and how serious it would be).
• They should follow the standards of Codex Alimentarius (food safety), OIE/WOAH (animal health) and IPPC (plant health).

• A country can set a stricter standard only if it has scientific justification.

• TBT Agreement: technical rules must be non-discriminatory (imports and local goods are treated the same). They must not restrict trade more than necessary, and they should be based on international standards.

• Textile quotas:
• The Multi-Fibre Arrangement (MFA, 1974) let rich countries set bilateral quotas on textile imports from developing countries.
• The Agreement on Textiles and Clothing (ATC, 1995) phased these quotas out over 10 years. They ended on 1 January 2005.
• US safeguard quotas on China ran until 2008.

Why NTBs rise and fall

• They rise when tariffs fall. Countries still want protection, so they shift to hidden tools such as SPS limits, technical standards and anti-dumping cases.
• The developing-country complaint: Class 11 says developing countries "still do not have the access to developed countries' markets because of high non-tariff barriers".
• They fall through:
• WTO dispute rulings, as in the DS90 case
• Tariffication
• Trade facilitation deals such as the Trade Facilitation Agreement (TFA)

In India

Before 1991: import licensing and QRs were part of import substitution (making goods at home instead of importing them).

• They protected Indian industry.
• They also created the "licence raj" and led to inefficiency.
• Class 11 notes that import licensing was abolished in 1991, except for hazardous and environmentally sensitive items and a few restricted imports.

The DS90 dispute (US vs India):

• India kept QRs on farm, textile and industrial goods in 2,714 tariff lines and justified them under Art. XVIII:B [5].
• The measures included:
• an import licensing system
• canalisation (imports allowed only through government agencies)

• an actual-user requirement for licences [5]

• India offered to remove the QRs over seven years. The US wanted a shorter period, so no consensus was reached [5].

• The US asked for consultations on 15 July 1997. The panel was set up on 18 November 1997 [5].
• The panel report came out on 6 April 1999 and the Appellate Body report on 23 August 1999. Both went against India, and they were adopted on 22 September 1999 [5].
• India removed QRs on most items by 1 April 2000. It removed them on the remaining 715 items from 1 April 2001 [5].
• Effect (Class 10, Ravi's capacitor case): "restrictions on imports of capacitors" were removed "as per its agreement at WTO in 2001". Cheaper Chinese capacitors then hurt small Indian producers.

Quality control orders (QCOs):

• A QCO is issued under the BIS Act 2016. It makes certification by the Bureau of Indian Standards (BIS) compulsory before a product can be sold or imported.
• QCOs cover toys (2021), footwear, chemicals, polyester, steel and more.
• Critics call them a disguised NTB:

• foreign suppliers find BIS certification hard to get → input supply shrinks → input prices rise → MSMEs (small manufacturers) that use these inputs become less competitive.

• Several QCOs on inputs were withdrawn or deferred in 2025 (verify current).

NTBs India faces abroad:

• The EU sets very low maximum residue limits (MRLs), the highest amount of a pesticide allowed in food. Its limit for tricyclazole hurt Indian basmati rice exports.
• In 2024, ethylene oxide found in Indian spices led to rejections.

Tackling procedural NTBs:

• SWIFT (Single Window Interface for Facilitating Trade): a trader files one electronic form, and it goes to customs and all other agencies, such as FSSAI and plant quarantine.
• ICEGATE: the Indian customs portal for e-filing and e-payment.
• Faceless assessment (2020): customs officers in another city assess documents online, so the trader never meets the officer. This cuts delays and scope for corruption.
• Authorised Economic Operator (AEO) programme: certifies trusted traders who meet security and compliance standards, so they get faster and simpler clearance.
• National Time Release Study (NTRS) 2025:
• For exports at seaports, regulatory clearance averaged 29 hours 36 minutes.
• Logistics after the Let Export Order (the customs permission to ship) took 157 hours 50 minutes [3].
• So customs is no longer the main delay. Port and transport logistics are.

Don't confuse with

• Tariff: a tariff is a visible tax on imports, and its revenue goes to the government. A quota is a non-tariff barrier, and its rent goes to import-licence holders.
• SPS vs TBT: SPS covers only food safety and animal or plant health. All other product rules fall under TBT, such as car safety, electrical standards and labels.
• VER vs import quota: in a VER, the exporting country limits its own exports. In a quota, the importing country sets the limit. VERs are prohibited by Art. 11 of the Safeguards Agreement.
• Trade facilitation: this is not a barrier. It is the removal of procedural NTBs by simplifying customs work and paperwork.

Prelims Hooks

• GATT Art. XI generally bans quantitative restrictions. Art. XVIII:B allows them for developing countries facing balance-of-payments problems.
• DS90 (US vs India):
• QRs on 2,714 tariff lines
• Appellate Body report on 23 August 1999

• the last 715 items freed from 1 April 2001 [5]

• MFA/ATC textile quotas ended on 1 January 2005. NCERT Class 11 is outdated when it says US textile quotas on India and China continue.

• SPS standard-setting bodies: Codex Alimentarius (food), WOAH/OIE (animals) and IPPC (plants). Trap: general product standards come under TBT, not SPS.
• Trade Facilitation Agreement:
• concluded at Bali MC9 (2013)
• in force from 22 February 2017
• the first multilateral deal in the WTO's history

• estimated to cut trade costs by an average of 14.3% [2]

• QCOs are issued under the BIS Act 2016. India's single-window system is SWIFT, and its customs portal is ICEGATE.

Mains Points

• NTBs as "new protectionism":
• As tariffs fall, EU pesticide limits (tricyclazole in basmati) and ethylene oxide checks on spices (2024) limit Indian farm exports.
• India's response should include more testing labs and residue monitoring.
• Farmers need help to meet Codex standards.

• India should challenge rules that lack science at the WTO SPS Committee.

• QCOs are a double-edged tool:

• They improve quality and keep out cheap, unsafe imports, which fits Atmanirbhar Bharat.
• But QCOs on inputs raise costs for MSMEs and exporters, and they invite charges that they are disguised NTBs.

• Better targeting means QCOs mainly on finished consumer goods, faster BIS certification of foreign plants, and regular reviews like the 2025 withdrawals.

• From QRs to tariffs to trade facilitation:

• The DS90 case showed that QRs justified by BoP problems cannot last once foreign exchange reserves are comfortable.
• India's 1991–2001 shift from licences to tariffs made protection transparent and pushed firms to become more efficient. It also exposed small producers, as the Ravi capacitor case shows.
• Today the gains depend on logistics, because post-customs delays are the main problem (NTRS 2025) [3].
• The NCAER estimate puts India's logistics cost at 7.97% of GDP (2023-24), and smaller firms pay much higher logistics costs [4].
• So the National Logistics Policy (2022) and PM Gati Shakti should be linked with adjustment help for MSMEs.

Related concepts

• Import quota
• Quantitative restrictions
• Import licensing
• Voluntary export restraint
• Sanitary and phytosanitary measures
• Technical barriers to trade
• Quality control order
• Trade facilitation
• Authorised economic operator

Read more

• Non-tariff barriers and trade facilitation