The real barriers to trade are no longer tariffs, Pg10

Key Highlights:

• Non-Tariff Barriers (NTBs), not tariffs, are now the primary obstacles to global trade, affecting approximately 90% of international commerce.
• Since the World Trade Organization (WTO)'s establishment in 1995, average tariff rates have nearly halved, while NTBs have surged.
• The European Union (EU) utilizes NTBs for about 94% of its imports, significantly higher than the U.S. (77%) and India (45%).
• India's Free Trade Agreement (FTA) utilization rate is low, around 25%, largely due to persistent NTBs despite tariff reductions.
• Newer Indian trade agreements, such as the UAE Comprehensive Economic Partnership Agreement (CEPA) and India-European Free Trade Association (EFTA) Trade and Economic Partnership Agreement (TEPA), explicitly address NTB reduction.

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Detailed Insights:

• NTBs encompass regulations, certifications, licensing rules, product requirements, technical standards, and health and safety measures.
• These regulatory hurdles are less transparent than tariffs and significantly increase compliance costs, particularly for small and medium-sized exporters.
• Over half of the 20,000 global product and safety regulations introduced in the last 70 years have emerged since 2000.
• In 2025, WTO members submitted over 7,700 notifications of NTBs, a tenfold increase compared to 1995.
• EU NTBs are concentrated in environmental rules, chemical safety, product standards, and climate policies like the Carbon Border Adjustment Mechanism (CBAM).
• U.S. NTBs are often driven by strategic competition and security concerns, involving export controls and restrictions on critical technologies.
• India is shifting its trade strategy by expanding quality regulations on imports of electronics, machinery, and chemicals to bolster domestic manufacturing.
• The ASEAN-India FTA has low preferential tariff utilization due to NTBs such as Indonesian pharmaceutical registration requirements and Thai customs procedures for gems.
• The UAE CEPA mandates automatic recognition of medicines approved by major global regulators and mutual acceptance of laboratory testing.
• The India-EFTA TEPA, in force since October 2025, includes mutual recognition of standards and a dedicated sub-committee to address NTBs, making their reduction a legally binding obligation.

Key Concepts Involved:

• Non-Tariff Barriers (NTBs): Regulations, certifications, licensing rules, and product requirements that goods must meet before entering a market.
• World Trade Organization (WTO): An intergovernmental organization that regulates and facilitates international trade among its member nations.
• Free Trade Agreement (FTA): A pact between two or more countries to reduce or eliminate tariffs and other trade barriers on goods and services.
• Carbon Border Adjustment Mechanism (CBAM): An EU policy designed to put a fair price on the carbon emitted during the production of carbon-intensive goods imported into the EU.
• EU Deforestation Regulation: An EU law aimed at minimizing the Union's contribution to global deforestation and forest degradation through its consumption of certain commodities.