What Are the Types of Trade Barriers Found in the U.S.?

In past decades, globalization steadily reduced trade barriers, which hinder the free flow of goods and services across borders. Yet there are still significant trade barriers in place, even in the U.S. What do such barriers look like?

In an April Economic Synopses essay, St. Louis Fed economist and Economic Policy Advisor Fernando Leibovici and Research Associate Jason Dunn took a comprehensive look at trade barriers in the U.S. They divided these barriers into two broad categories:

• Tariffs, which are taxes on imports represented as a percentage of the total imported value
• Non-tariff measures (NTMs), which include quotas and technical standards

Tariffs and Non-Tariff Measures

To determine the prevalence of these U.S. trade barriers, the authors used 2014 data from the World Bank and the United Nations Conference on Trade and Development, which are available through the Trade Analysis Information System and World Integrated Trade Solution. The figure below shows how tariffs varied by industry.

Tariffs

SOURCE: World Integrated Trade Solution.

The authors found that the average ad valorem tariffs differed greatly across industries, from less than 1% in the wood and machinery/electrical industries and more than 11% in the textiles and footwear/headgear industries. If textile-related industries are excluded, however, tariffs in other industries are relatively low—below 6%.

Comparing NTMs, however, is more difficult since they encompass a variety of different mechanisms, the authors noted. So they looked at the share of industry imports subject to some type of NTM. The figure below shows how these shares varied by industry.

Non-Tariff Measures (NTMs)

SOURCE: World Integrated Trade Solution.

“In contrast to tariffs, NTMs are ubiquitous across US imports in all industries,” Leibovici and Dunn wrote. “For instance, in half the industries, NTMs cover more than 70% of total imports.”

For example, the share of import value covered by NTMs in the metals and minerals industries are fairly low, while the share for animals and textile/clothing industries are more than 90%, they noted, adding that the findings suggest that NTMs may be a significant barrier to trade in the U.S.

“The intended goal of tariffs is to distort international trade flows, often in the interest of protecting domestic industries,” they wrote. “In contrast, NTMs may be in place to achieve some other goal, and their distortions of international trade flows may just be collateral damage the US pays to fulfill these other goals.”

Such goals include regulating the safety of food and medicine imports, they added.

Breaking Down NTMs by Type

To get a better sense of NTMs used, Leibovici and Dunn looked at four broad categories.

• Sanitary and phytosanitary (plant health) measures
• Technical barriers to trade. These include labeling and packaging requirements and product quality and safety requirements.
• Pre-shipment inspection and other formalities
• Charges, taxes and other para-tariff measures

Their analysis looked at four select industries (metals, machinery/electrical, textiles/clothing and food products) and all industries. The authors found that while the share of import value covered by NTMs for all industries was more than 75%, the percentage varied when by broken down by type: This share was close to 80% for technical barriers but less than 20% for the other three types.

“Some of these [technical barriers] may be critical to ensure the safety of US consumers, but others may be in place to limit the extent of international trade,” they wrote.

Types of NTMs Vary

The authors also found that the type of NTM differed greatly across the select industries. They noted that sanitary and phytosanitary requirements covered more than 90% of imports of food products but had no presence in metals, machinery/electric or textiles/clothing imports.

“On the other hand, technical NTMs cover more than 75% of imports of Machinery/Electrical,” they wrote. “Again, some of these may be in place to ensure safety standards, but they may also reflect the goal of protecting domestic industries from foreign competition.”

(A figure showing the breakdown non-tariff measures by select industries can be found in their Economic Synopses essay.)

Leibovici and Dunn noted that while the prevalence of NTMs may suggest a tradeoff between safety, health and quality of imports and international trade barriers, that needn’t be the case.

“Countries can expand international trade agreements to ensure the standards of the goods traded: Economies with similar levels of economic development, such as the US and Europe, could expand trade agreements to accept each other’s health and safety standards, thereby ensuring these ultimate goals are met and that trade is open,” they concluded.