Non-tariff measures (NTMs) encompass any measures (public or private) other than tariffs that operate directly or directly to affect international trade flows. NTMs raise prices of both imports and import-competing goods, and tend to favour domestic over foreign supply sources by causing importers and foreign exporters to charge higher prices and/or restrict import volumes.
As a result of post-war agreements, NTMs are now considered the most important barriers to trade (replacing tariff barriers). Their list is very long, ranging from very strict explicit (commonly called "hard-core) measures like quantitative limitations (import or export quotas) and variable levies, to rather subtle, less conspicuous measures which include: discriminatory state trading, national procurement practices, content regulations, anti-dumping legislation, marketing obstacles, packaging and labelling restrictions, safety and health requirements, customs procedures, surcharges and miscellaneous fees.
In general, the explicit measures can be expected to be the more protective than the implicit or more subtle measures. However, in some cases the explicit measures have rather modest effects on trade while more subtle measures are extremely protective. For example, an import quota is very explicit; it limits imports to a predetermined volume. To the extent that the quota limit is below the free trade volume, the quota is protective – the lower the quota limit, the more protective the measure. However, if a quota limit is near the free trade volume, the quota would have minimal restrictive effects on trade. In contrast, a health regulation might require imported products to meet certain standards that are equivalent to those required of domestic goods. So long as the foreign producer is able to comply with those standards, the measure would have no protective effect at all. On the other hand, if the foreign producer cannot meet the standard, imports would be prohibited; the protective effect is the most extreme possible. In this way, tariff concessions may be rendered partly or wholly ineffective by non-tariff restrictions.
A broad definition of NTMs includes certain para-tariff measures, import deposits and surcharges, variable levies, anti-dumping/countervailing duty actions (including investigation, duties and undertakings), quantitative restriction (including prohibitions, quotas, non-automatic licences, State monopolies, voluntary export restraints, restrains under the Multi-Fibre Arrangement (MFA) and similar textile arrangements), import surveillance, automatic licences, and certain price control measures. A narrow definition excludes from the broad group para-tariff measure, import deposits and surcharges, anti-dumping/countervailing duty actions, automatic licensing, and import surveillance methods. Those so excluded have a potential to restrain imports, but are less restrictive in impact.
Quantifying the effects of non-tariff measures on international trade flows is most difficult. One must first identify the non-tariff measure facing exporting countries. Second, the identified measures must be categorized to determine which measures are likely to have the more adverse effect on exports. And finally, the costs to the exporting countries of these measures must be estimated.
By far the most serious non-tariff measure affecting exports of developing countries is the export restraint programme under the GATT Multifibre Arrangement (MFA). Exports of textile and apparel products from more than 30 developing countries are restrained by 1 or more of the industrial countries.
Aside from this general area, the major product sectors in which developing countries were subject to an explicit non-tariff measure were seafood in Japan; sugar in the EEC/EU, Japan and the USA; tuna and steel products in the USA; and agricultural products, consumer electronics, footwear and steel products in the EC. Excluding MFA-restrained products, total exports valued at $25.6 billion were affected. This means that an above-average proportion of imports from developing countries into the developed market economies is subject to non-tariff barriers. It has been estimated that 28% of the value of imports from developing countries is subject to these restrictions, as compared with 11% for imports from the rest of the world. In total, non-tariff measures lowered exports from developing countries by an estimated $4.6 billion, or by 18% of their current exports of the products to the restraining countries.
NTM-affected imports in 10 select OECD "countries", including the EEC/EU (millions of USA dollars) in 1986 were Austria (8.7), EEC/EU (4,216.3), USA (1,635.8), Canada (934.8), Japan (439.4), Norway (134.6), Switzerland (88.0), Sweden (50.6), Finland (47.3), a total of $7,655.5 million.
Realising the futility of tariff-based instruments to protect domestic interest groups in the post-GATT (1994)/WTO era, developed countries have started using non-tariff rules- or standards-based measures to serve protectionist demands. This has prevented exporters from the developing world to translate their comparative advantage in the trade of specific commodities and services into competitive advantage.