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What is a Trade Barrier

Trade barriers are measures that governments or public authorities introduce to make imported goods or services less competitive than locally produced goods and services. Not everything that prevents or restricts trade can be characterised as a trade barrier.

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A trade barrier may be linked to the very product or service that is traded, for example technical requirements. A barrier can also be of an administrative nature, for example rules and procedures in connection with the transaction. In a number of areas, special international ground rules have been agreed, which limit the ways in which countries can regulate trade. It means that some barriers are legal while others are illegal.

Trade barriers within the EU are subject to special rules that apply to the internal market of the EU.

Sometimes it may also be possible to assist companies that face obstacles to trade that do not fall under the definition of actual trade barriers.

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Trade Barriers

Trade barriers are measures that governments or public authorities introduce that prevent or restrict overseas trade and investment. These measures need not necessarily take the form of legislation or a specific decision. They may also take the form of current practice. As a result of these measures, domestic companies receive a competitive advantage relative to their foreign counterparts.

It is accepted that in many cases, products are liable to customs duties when imported into a market and that imported products ought to be accompanied by the correct documentation. In some cases, however, customs duties may be unreasonably high or customs clearance may take an unreasonably long time.

Trade barriers may take the form of, for example:

  • Customs duties
  • Customs procedures
  • Technical regulations, standards, etc. - for example for the purpose of consumer protection, health protection, protection of the environment, etc
  • Veterinary and phytosanitary measures - barriers based on health and safety regulations
  • Restrictions on access to primary products - for example in the form of export levies that drive up prices artificially or special export prices that are higher than the price of the same primary products for use in national processing industries
  • Insufficient protection of intellectual property rights - both with respect to the scope of protection and with respect to the possibilities of legal protection. This includes, for instance, protection of patents, copyrights, trademarks and geographical indications of origin
  • Barriers to trade in services - for example in the form of discriminatory conditions
  • Restrictions on access to investment - for example through national participation requirements or restrictions on access to repatriation of profits
  • Unfair application of state aid and other forms of subsidies

Due to globalisation, trade restrictions have become increasingly significant.
 
At the same time, traditional trade obstacles such as tariffs and import restrictions have been reduced, as a result of international trade liberalisation. In the period following the Second World War, average tariffs for industrial goods have been reduced from approx. 40 percent to less than 5 percent.

As a consequence, other trade restrictions have become of relatively greater significance. These other trade restrictions are often based on regulations and principles relating to qualitative matters, for example: product quality requirements and product packaging requirements ostensibly for the purpose of consumer protection; education and qualification requirements for providers of services; or rules relating to patent and trademark protection.

This has contributed to making it more difficult for companies to gain an overview of rules and changes to rules, making the handling of trade barriers more complicated, as barriers touch on matters that are subject to internal national legislation or regulation in the export markets.

Legal and Illegal Trade Barriers

Through the World Trade Organisation (WTO) and agreements made by the EU with other countries, some general rules have been established for trade with countries outside the EU. These ground rules set the limits as to what trade barriers can be put in place.

As such a trade barrier may either be:

  • Illegal - it violates international agreements and rules; or
  • Legal - it does not violate rules and agreements.

Nevertheless, whether legal or not, trade barriers prevent or restrict imports or investments to the market in questions. A barrier may be legal in principle, but still be open to criticism. This is the case, for instance, if the conditions on which a decision was based have changed. For example:

  • Customs duties: if they exceed an agreed level ("bound duty rates"), they are illegal. If they are below the agreed level, they are legal, but trade restrictive.
  • Customs procedures: they are in principle legal, but a burden on trade. If procedures become more burdensome than necessary, they may be illegal.
  • Technical regulations, standards, etc.: they are in principle legal, for example for the purpose of consumer protection, health protection, and the protection of the environment, etc. However, in some areas there are international standards that must be complied with, and there may also be special procedural rules. If they are not complied with, a measure may become illegal.

With regard to other types of trade barriers, including intellectual property rights, state aid, or rules relating to the provision of services, it can be more difficult to draw a clear line between what is legal and illegal.

In some instances, procedures have been laid down which countries must comply with in regard to measures relating to trade.

International agreements also contain rules for what can be done if these agreements are not complied with. In the WTO, the Dispute Settlement Body has been established, which functions much like a court.

Information about current international trade rules are available from the Technical Export Advice Unit of the Trade Council.
 
The EU Commission’s website on market access presents information about applied duty rates and about import formalities. From the World Trade Organisation (WTO), information is available about duty rates and about notified technical trade restrictions.

Types of Trade Barriers

This overview shows various types of trade barriers that companies may encounter. The overview can be used to find out what the various types of barriers imply and what they are called.

Trade Barriers within the EU

Trade between EU Member States and trade with Norway and Iceland takes place according to the special rules that apply to the internal market of the EU.
 
In case of problems in connection with the EU internal market, assistance is available from the Danish Enterprise and Construction Authority.
Among other services, a special facility known as "SOLVIT" has been established, that may be used to resolve problems.

Trade Barriers outside the EU

In general, it is easier and faster to deal with illegal trade barriers than to negotiate new agreements.

Dismantling barriers may be achieved by means of a variety of instruments ranging from informal contacts to bringing cases before the Dispute Settlement Body of the WTO. The most comprehensive approach is through the dismantling of barriers in connection with WTO negotiations or negotiations of bilateral trade agreements. Also, for example, the accession of new member countries to the WTO or the enlargement negotiations of the EU mean that barriers will be dismantled in relation to the new candidate countries.

In addition to the EU barrier instrument and the impact of EU prioritisation on the area, Danish efforts to reduce barriers would include parallel bilateral action, for example through meetings, visits and travels as well as through the Danish Missions.

In connection with illegal barriers, countries will tend to react according to the rules and procedures laid down in international agreements, for example regarding the settlement of disputes. In case of legal barriers which, nevertheless, prevent trade, new agreements to remove barriers may be negotiated.

Trade barriers in third countries are registered in the EU Market Access Database.

Trade Restrictions that are not Barriers

Linguistic and cultural differences are examples of obstacles to trade that cannot be removed in the same way as a trade barrier. The fact that the language in China is Chinese – and that there are many variants of spoken Chinese – may make it difficult to penetrate the Chinese market. However, it is a fundamental market condition that needs to be addressed in order to export to China.

The same may apply to contact with the market and the collection of market information. To an exporter, these can be challenges that must be overcome.

Obstacles to trade that are not actual trade barriers which prevent or restrict exports, even though they make life difficult for Danish exports, can also be tackled.

Through the various services of the Trade Council and through the Danish Missions on the markets, exporters may often be assisted in handling these matters.

Moreover, there may be situations where international ground rules are not optimal, without it being a matter of an obstacle to trade. Through negotiations in the WTO and bilaterally between the EU and trading partners, efforts are being made all the time to improve the ground rules for international trade. Danish efforts in the negotiations are determined in cooperation between, among others, the Ministry of Foreign Affairs, other Danish authorities and trade organisations. Questions, proposals and input to the negotiations may be forwarded to the Trade Policy Department in the Ministry of Foreign Affairs (hpa@um.dk).

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Eksportrådet - The Trade Council
Ministry of Foreign Affairs of Denmark
The Trade Council
Asiatisk Plads 2
DK-1448 Copenhagen K

Phone: +45 33 92 05 00
eksportraadet@um.dk