Government Administered Protection in international Trading

Administered protection encompasses a wide range of bureaucratic government actions, which have grown in absolute as well as relative importance over the last decade or more. More recent are in fact regarded as the outgrowth of administered protection actions. Mention has already been made of one of the administrative measures, namely licensing. Other important administrative protection measures include the following

Safeguards action which under WTO Article XIX enables countries to undertake temporary restriction against surges threatening the viability of domestic industries, have become a common form of administered protection. Although such measures are initially resorted to provide some breathing space and flexibility for structural adjustment they often lead to some or other form of permanent barrier.

The Uruguay Round has sought to limit the misuse of safeguard action. The Uruguay Round Agreement which seeks to rationalize the safeguard also stipulates that a member shall not seek, take or maintain any voluntary export restraints, orderly marketing arrangements or similar measures on export or import trade. The Agreement however, provides for special consideration for the developing countries.

Health standards: Several health and product standards imposed by developed countries hinder the exports of developing countries because of the added costs of technical requirements. The need for maintaining health and product standards is unquestionable. The objection should be to their use with the deliberate intention of trade restriction or discrimination.

The Agreement on Technical Barriers to Trade ( also known as the Standards Code) evolved by the Tokyo Round of the GATT lays down that when governments or other bodies adopt technical regulation or standard for reasons of safety, health, consumer or environmental protection, or for other purpose, these should not create unnecessary obstacles to trade. Exporters from developing countries complain, however, that this code is not respected by developed countries in several cases.

Customs Procedures: Certain customs procedures of many countries become trade barriers. For example, studies point out that frequent changes of Japan’s customs regulations are themselves a significant barrier to exporters, especially those not affiliated with Japanese overseas joint ventures.

The Tokyo Round formulated a Customs Valuation Code intended to provide a uniform and neutral system for the valuation of goods for customs purposes which will confirm to the commercial realities and to prevent the use of arbitrary or fictitious values.

Consular Formalities: A number of countries insist on certain consular formalities like certification of export documents by the respective consulate, of the importing country, in the exporting country. This becomes a trade barrier when the fees charged for this is very high or the procedure is very cumbersome.

Government procurements tend to hinder free trade. This was observed obstructing free trade frequently. The Tokyo Round has, therefore, formulated an agreement on government procurement with a view to securing greater international competition in government procurements.

State Trading also hinders free trade many a time because of the counter-trade practices, canalization etc. State trading was an important feature of the foreign trade of the central economies of many developing countries. With the economic liberalizations in most of these countries, the role of state trading has declined.

Monetary Controls: In addition to foreign exchange regulations, other monetary controls are some times employed to regulate trade, particularly imports. For instance, to tide over the foreign exchange crisis in 1990-91 and 1991-92, the Reserve Bank of India took several measures which included a 25% interest rates surcharge on bank credit for imports subject to a commercial rate of interest of a minimum 17%, the requirement of substantially high cash margin requirement on most imports other than capital goods, and restrictions on the opening of letters of credit for imports.

Now the current situation is different and most of the restrictions cited above are no longer in practice in most of the WTO countries.