There are different types of barriers created by individual countries to gain advantage of choice. These barriers include technical standards safety, supporting sanitary and local content requirements and regulations that make importing into the country more difficult. Like tariffs, these restrictions give the domestic industry a price advantage over foreign competitors. For example, Company A faces burdensome local content requirements and rules-of-origin restrictions when serving the South Asia and African markets from its manufacturing base. One more example indicates that many pharmaceuticals importers are required to conduct local clinical trials, even for drugs that the US Food and Drug Administration (FDA) or the European Union's had previously approved.
Role of border administration
Speed of customs clearance determines the pace and ease with which imports and exports can clear government controls, this also indicates the quality and range of services being provided by customs authorities. An insufficient allocation of resources is indicated by in efficiency of the customs agencies and includes a failure to adopt best practices in customs procedures. A frequent inspection on the part of customs also shows the invisible barriers do exist.
For example, a delivery company is highly sensitive to the efficiency of customs processes around the world and particularly in developing countries where investments to improve customs processing have lagged. Customs authorities in many developing countries do not employ risk analysis tools to target physical inspections, requiring them to make room far more shipments. In emerging markets, customs agencies do not operate around the clock, seven days a week, resulting in long delays. These barriers weigh heavily on industries like chemicals that are regulated by multiple agencies. For example, when Chemical Co exports into the US, its products can fall under the jurisdiction of up to 12 regulators, including the FDA, the Drug Enforcement Agency (DEA), the Department of Commerce Bureau of Industry and Security (BIS) and the Department of Homeland Security. These agencies operate independently and often lack effective co-ordination of communications, which results in the imposition of additional rules and regulations and increased delays. These practices reflects barriers associated with corruption, which could include the direct costs of making "facilitation payments" (speed money) or the added delays.
Transport infrastructure
Moving goods across a large territory from inland facilities to coastal ports creates hinderer as to the flow of trade. The availability of quality transport infrastructure reflects the number of airports, the quality of roads and the amount of congestion at ports. For example, delays suffered by company dealing in agricultural products and food with significant operations illustrate the types of barriers firms can face in transport infrastructure. Poorly maintained roadways reduce truck weight capacity and speed, coupled by increase maintenance and repairs. A poor rail network forces to rely on trucks for longer-haul cargoes where rail would be more efficient. Additionally, inadequate port infrastructure creates choke points when cargo is unloaded.
Quality of transport services
There are barriers related to transport services, which may include a dearth of companies picking up or delivering goods to a country and a lack of a capable local logistics industry. Use of information and communication technologies
Unreliable communications and technology infrastructure adds uncertainty to a company's supply chain, for example, making it difficult to track containers at ports or forcing shippers to rely on paper documentation instead of electronic customs processing.
Environment around business
Business environment encompasses broad issues related to a country's general business conditions, but two aspects are important - its regulatory environment and physical security.
Regulations
Barriers arising from a country's regulatory environment increase costs and risks and reflect an unstable or poorly functioning government. These barriers create difficulties in hiring foreign workers and a lack of available trade finance. The costs and risks that an uncertain regulatory environment creates can be steep. In Nigeria, for example, a company was forced to cease operations temporarily because of internal social and political conflicts. In Zambia, a company along with other foreign companies saw their businesses adversely affected by economic and political mismanagement.
Consequences of Trade Barriers
These barriers weigh on a business in the following manner:
Add costs, both in terms of higher operating costs and increased capital expenditures.
More delays the business faces makes it less predictable.
Reduce the volume of trade activity.
Risk factors are increased.
Effects of corruption
The most sensitive and difficult trade barrier for companies to discuss is corruption. No company likes to admit paying illegal bribes, thus corruption's full scope is hard to quantify. The size of a bribe may be relatively insignificant; the consequences of not paying can be quite large. In extreme cases of pervasive corruption, some companies may be forced to exit a market altogether rather than try to compete on unequal terms.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates Karachi. To see author's other areas of interest visit Zafars Blog on International Studies http://blogoninternationalstudy.blogspot.co)