top of page

From Tariffs to Technical Measures: How Do Trade Agreements Shape Border Commerce?

Updated: Oct 25, 2023


Introduction

Trade agreements are critical tools for facilitating international trade. They set the rules that govern the exchange of goods and services across borders and have a significant impact on global commerce. The United Nations Conference on Trade and Development (UNCTAD) has recently published a [report](https://unctad.org/publication/key-statistics-and-trends-trade-policy-2022), providing key insights into how trade agreements influence border commerce.


Critical Trade Policy Measures and Requirements

A major highlight of this report is the influence that technical measures and requirements have on world trade. Technical measures and requirements currently regulate about two-thirds of world commerce. These measures contribute substantially to trade costs, impacting the cost of compliance which are often higher than tariffs.


Such measures extend to product standards, labeling, and certification. Therefore, understanding the detailed specifications of these technical measures is crucial for navigating international trade effectively.

Sanitary and Phytosanitary Measures (SPS) also play a pivotal role, especially in the agricultural sector. SPS measures are necessary to protect human, animal, and plant health, and almost all agricultural products are subject to various forms of SPS measures. They might include regulations on food safety, animal welfare, and plant health.


Another significant factor that the UNCTAD report highlights is tariffs. Despite remaining relatively stable in recent years, tariffs have seen a notable increase in cases such as the bilateral tariffs between the United States and China.


The Impact of Trade Costs

Trade costs are another key aspect to consider when analyzing how trade agreements influence border commerce. For instance, as of 2021, trade costs that are directly related to tariffs stood at around 2% for developed countries and roughly 4% for developing countries.


The restrictiveness related to tariffs is also noticeable, especially in developing countries in South Asia and Africa. Sectors such as agriculture, apparel, textiles, and leather products often bear the brunt of such high tariffs.


However, various efforts have been made to mitigate the impact of these costs. The report notes that tariffs have been marginally reduced in certain sectors to facilitate the trade of products related to the COVID-19 pandemic.


Influences of Preferential Trade Agreements on Global Trade

The role of Preferential Trade Agreements (PTAs) has been increasing, as reflected in regional and bilateral PTAs. They significantly contribute to deeper economic integration. This is evident as approximately half of the world trade has occurred under some form of PTA as of 2021.


PTAs, however, are not limited to goods only but also encompass services. They increasingly deal with rules beyond reciprocal tariff concessions, thereby broadening their influence on global trade.


The report by UNCTAD offers more insights into the area of PTAs and their influence on border commerce, highlighting their burgeoning importance in shaping the global trade landscape.


Chinese Perspective: Trade Defense Measures

Moving on to the area of trade defense measures, most of these are implemented by developed countries and major emerging economies to protect their domestic industries from unfair trade practices. These include anti-dumping duties, countervailing duties, and safeguard measures.


Detailed Analysis: Trade Agreements and Border Commerce

After understanding the basics, it's essential to delve deeper into trade agreement subtleties. As these agreements set border commerces overall framework, their evolving trends directly influence global trade.

It is noteworthy how the paradigm has been moving towards trade in green goods. Green goods fall into the category of environmentally friendly goods, and their trade has gained prominence in recent years. Understanding the various tariffs, non-tariff measures, and trade defense measures associated with green goods could significantly benefit nations looking toward sustainable development.


Researching the broader picture, tariffs and non-tariff measures are other elements shaping border commerce. Collectively, these measures affect pricing strategies and affect product competitiveness in the international markets. For instance, if a product's tariffs are high, it can lead to inflated prices, effectively reducing its appeal to consumers abroad.


Trade defense measures, on the other hand, protect domestic industries from unfair trading practices. With several trade defense measures in place, primarily from developed countries and major emerging economies, the dynamics of the global trade scene are continually shifting, affecting how businesses approach border commerce.


Indeed, trade agreements play an instrumental role in shaping border commerce and facilitating international trade. They not only stipulate the rules for the exchange of goods and services across borders but also encourage innovation, competition, and economic stability on a global scale.


Additional Resources

There are several resources available for individuals interested in understanding more about trade agreements and their impact on border commerce. One such resource is The Benefits of Free Trade Agreements published by [Global Affairs Canada](https://www.international.gc.ca/transparency-transparence/state-trade-commerce-international/2022.aspx?lang=eng). It provides insights into how free trade agreements work to lower trade barriers and reduce overall costs of trade.


Another insightful read is Trade Agreements and Economic Theory by the [Wilson Center](https://www.wilsoncenter.org/chapter-3-trade-agreements-and-economic-theory). It discusses the objectives and provisions of trade agreements, providing a keen understanding of how political realities shape these agreements.


Finally, for those interested in how trade policies specifically affect the fashion industry, The Fashion Market and Trade 2.0 by [McKinsey](https://www.mckinsey.com/industries/retail/our-insights/the-fashion-market-and-trade-2-0) provides a wealth of information.


Conclusion

In conclusion, trade agreements are powerful tools that govern international commerce. From setting technical measures to handling tariffs, understanding how these agreements operate is crucial for anyone involved in border commerce. With resources and reports like the ones from UNCTAD, studying the underlying themes of such agreements can offer key insights into the future of international trade.


References

2. Global Affairs Canada. (2022). The Benefits of Free Trade Agreements. [link](https://www.international.gc.ca/transparency-transparence/state-trade-commerce-international/2022.aspx?lang=eng)

4. Mckinsey. (2021). The Fashion Market and Trade 2.0. [link](https://www.mckinsey.com/industries/retail/our-insights/the-fashion-market-and-trade-2-0)

22 views0 comments

Commentaires


bottom of page