International Trade Department

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Tariffs/Quotas

A tariff is a tax placed on imports and exports. Quotas restrict the quantities of goods that can be imported or exported.

Economies regulate their imports through a combination of tariff and non-tariff measures. The most common form of tariff is a duty calculated as a percentage of the value of the product (ad valorem), but tariffs may also be calculated on a specific, or per unit, basis. Tariffs may be used to raise fiscal revenues or to protect domestic industries from foreign competition - or both.

Some countries set fairly uniform tariff rates across all imports. Others are more selective, setting high tariffs to protect favoured domestic industries and low tariffs on goods that have few domestic suppliers or that are necessary inputs for domestic industry.

Non-tariff barriers, which limit the quantity of imports of a particular good, take many forms. Some common ones are licensing schemes, quotas, prohibitions, export restraint arrangements, and health and quarantine measures. Non-tariff barriers are generally considered more economically inefficient than tariffs because efficient foreign producers cannot overcome the barriers by reducing their costs and thus their prices. A high percentage of products subject to non-tariff barriers indicate a protectionist trade regime.

Strict health regulations and domestic product standards are important non-tariff barriers that often constrain developing countries products entering developed country markets. While these regulations are valid for public health and safety reasons, they should be based on the best available scientific evidence and countries should accept internationally agreed standards, rather than seeking to impose their own higher levels which can act as an unfair trade barrier.

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Trade Facilitation

Trade facilitation is an important part of trade reform and is being implemented by the majority of developing countries. It mainly consists of easing border restrictions to enable trade and liberalisation of foreign exchange markets. To successfully integrate developing countries into the world economy is dependent on a series of complex, behind-border measures that fall under this heading of trade facilitation. Broadly defined, these measures include customs reform and port efficiency.

Trade facilitation involves simplifying the process of trading goods across borders. This includes not only improving the physical transit infrastructure, but also streamlining the administrating of trade policies. An example of this would be combining various customs documents into one simple one that only needs to be completed once. So it also includes institutional and regulatory reform.

Another example of where Trade Facilitation has the potential of bringing important benefits to developing countries is in the form of increased efficiency in trade flows. For example, in Mozambique an overhaul of customs management has led to a rise in customs revenue from US$86m in 1996 to US$198m in 1999 and to a record US$236m in 2000 - despite cuts in import duty in 1996 and 1999. 

DFID supports trade facilitation initiatives in developing countries to reduce trade constraints that are of particular importance to poor producers and small-scale traders. We will promote lesson learning from these initiatives so that the World Trade Organisation (WTO) Trade Facilitation negotiations take account of developing country circumstances. Particularly in terms of what can be implemented by when, and the support they may require to do so. We will play our part in addressing developing countries' negotiating capacity constraints and will not sign up to any agreement that we do not believe to be in the interests of developing countries as a whole.

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Trade-Related Capacity Building (TRCB)

Since 1998, DFID's total financial commitment to TRCB activities has been £181 million. Much of DFID's support to TRCB is integrated into DFID's other development programmes, such as private sector development or livelihoods projects. A recent update of DFID's inventory of TRCB activities has led to an increase in the total commitment figure for TRCB activities from the previous £174 million figure.

See case studies in TRCB

Another term you may have come across is 'Aid for Trade'. For the poorest, Aid for Trade is as critical as market access. A fundamental issue is that for many developing countries they are ill equipped to take full advantage of new trade opportunities because of significant supply-side and institutional constraints. There are many factors that contribute to these constraints such as Africa being largely a landlocked continent with fewer manufacturing based export-led opportunities because of the distance to seaports. Lack of adequate roads, and infrastructure such as telecommunications, the high burden of disease and poor governance all contribute to why Africa has a weak capacity to trade. These are still further driven by its low productivity, poor competitiveness and lack of education.

However, poor governance and corruption is as much a result of poverty as it is a cause. Many countries in Asia with even greater corruption than in Africa have achieved rapid economic growth while Africa's well-governed democracies such as Ghana, Senegal and Tanzania have stagnated somewhat.

The World Bank estimates that countries in Africa normally absorb all or most of their own transport costs of exporting. Africa's net freight and insurance payments in the 1990s were about 15 percent of the total value of the region's exports and for Africa's landlocked countries the figure goes up to 40 percent. Similarly on trade facilitation: port efficiency, the customs environment, the regulatory environment and trade-related services infrastructure, World Bank estimates of 75 developing countries suggest that improvements could realise the equivalent of $377 billion. Of this total $116 billion would result from improved customs and regulatory environments, $107 billion from more efficient ports and $154 billion from enhancing infrastructure in the trade-related services sector.

The Aid for Trade agenda is moving ahead very rapidly and has broad based support both by donors and developing countries and agencies. DFID works with a small technical group - including the International Monetary Fund (IMF)/World Bank to develop how a mechanism will operate in practice.

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Trade-Related Intellectual Property Rights (TRIPS)

Intellectual Property rights are the rights given to people over the creation of their minds. Books, paintings and films come under copyright, industrial property such as designs, inventions and trade secrets, trade marks and geographical indications can also be registered.

The TRIPS Agreement came into effect on 1 January 1995, and is to date the most comprehensive multilateral agreement on intellectual property. The three main features of the Agreement are:

• 1. Standards: in which minimum standards of protection are provided by each member.
• 2. Enforcement: this deals with domestic procedures and remedies for the enforcement of intellectual property rights.
• 3. Dispute Settlement: The Agreement makes disputes between World Trade Organisation (WTO) members about the respect of the TRIPS obligations subject to the WTO's dispute settlement procedures.

A particularly controversial area of the Agreement is developing country access to medicines. The UK Government is committed to fostering the access of poor countries to low cost medicines. The Government's Access to Medicines strategy is set out in detail in our recent publication Increasing access to essential medicines in the developing world: UK Government policy and plans(207 kb).

More information on TRIPS(156 kb)

Last updated: 4 October 2005

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