Non-Tariff Barriers (NTBs): The Real Barriers to Trade
Why in News
- India and the US issued a joint statement in February 2026 agreeing on a framework for an interim trade agreement.
- While headlines focused on tariffs — US reciprocal rate cut to 18% and India’s pledge toward zero duties on American goods — the real problem lies elsewhere.
- The White House fact sheet acknowledged both sides must negotiate removal of non-tariff barriers — the actual trade problem.
What Are Non-Tariff Barriers (NTBs)?
- NTBs are regulations, certifications, licensing rules and product requirements goods must meet before entering a market.
- They include technical regulations, environmental rules, health and safety requirements, packaging standards and testing procedures.
- Unlike tariffs which are transparent and measurable, NTBs operate within the system exerting far-reaching influence invisibly.
- Real trade obstacles today are faced in laboratories and law offices rather than at customs borders.
Global Trend: NTBs Now Cover 90% of World Trade
- Since WTO’s establishment in 1995, average tariff rates among members have fallen by nearly half.
- As tariffs declined, NTBs surged — today affecting around 90% of global trade — a sixfold increase over three decades.
- More than half of 20,000 global product and safety regulations introduced over 70 years have emerged since 2000 alone.
- In 2025 alone, governments submitted over 7,700 notifications of NTBs — ten times more than in 1995.
How Major Economies Deploy NTBs:
- EU: NTBs cover roughly 94% of imports — concentrated in environmental rules, chemical safety, packaging and the Carbon Border Adjustment Mechanism.
- USA: Driven by export controls, entity lists and semiconductor restrictions limiting rivals’ access to critical technology supply chains.
- India: Traditionally tariff-dependent, but now expanding quality regulations on electronics, machinery and chemicals to boost domestic manufacturing.
India’s FTA Utilisation Gap
- India’s overall FTA utilisation rate is only about 25% compared to 70-80% for developed economies.
- ASEAN-India FTA (since 2010): Preferential tariff utilisation remains below 50% as NTBs make benefits commercially impractical.
- Indonesia: Registration requirements restrict Indian pharmaceutical exports significantly.
- Thailand: Customs procedures force gems and jewellery exporters to reroute through Hong Kong.
- Japan FTA (since 2011): Indian pharmaceutical exports remain negligible as market approvals take five to seven years.
- South Korea: Bilateral trade reached USD 27 billion in 2024-25 but India accounted for only USD 6.5 billion.
Way Forward: Mutual Recognition and Binding NTB Norms
- India-UAE CEPA: Explicitly mandates automatic recognition of medicines approved by major global regulators and mutual acceptance of laboratory testing.
- India-EFTA TEPA (in force October 2025): Includes mutual recognition of standards, streamlined conformity assessment and a dedicated sub-committee mandated to address NTBs on an ongoing basis.
- For the first time in India’s trade agreements, NTB reduction is a legally binding obligation rather than a best-efforts commitment.
- Regulatory systems must be transparent and proportionate to avoid fragmenting global markets during supply chain reorganisation.
Source: The Hindu
