Nontariff trade barriers include all of the following EXCEPT a. domestic content regulations. b. import subsidies. c. customs duties. d. export subsidies.
The correct answer and explanation is:
Correct Answer: c. customs duties
Explanation:
Nontariff trade barriers (NTBs) are trade restrictions that countries use to control the amount of trade across their borders without relying on standard tariffs (taxes on imports). These barriers are increasingly used as alternatives to tariffs, especially in a global economy governed by World Trade Organization (WTO) rules that discourage excessive tariff use.
Let’s briefly review the choices:
a. Domestic content regulations
✅ This is a nontariff barrier. These require that a certain percentage of a product be made domestically. For example, a car might need to have 40% of its parts manufactured in the importing country. This indirectly limits imports by favoring local producers.
b. Import subsidies
✅ This is a nontariff barrier. While rare, import subsidies lower the cost of certain imports to support domestic industries (e.g., giving tax breaks to companies that import crucial machinery). Though more commonly the reverse (import restrictions) are seen, certain subsidies can distort trade indirectly.
c. Customs duties
❌ This is NOT a nontariff barrier. Customs duties are tariffs, meaning they are direct taxes on imports or exports. They are the most traditional form of trade barrier and are not considered “non-tariff.”
d. Export subsidies
✅ This is a nontariff barrier. Export subsidies provide financial support to local producers to encourage them to export goods, helping domestic industries become more competitive in global markets. This distorts trade and is regulated under WTO rules.
Summary:
Nontariff trade barriers aim to regulate trade without using direct taxation. These include quotas, subsidies, import licensing, and regulations like domestic content requirements. Customs duties, being direct taxes on goods crossing borders, are a tariff, not a nontariff barrier—making option (c) the correct answer.