Financial History Issue 133 (Spring 2020) | Page 16

Non-tariff barriers are like tariffs in dis-
guise. They are regulations and rules that
politicians put in place that make it harder
for other countries to sell their goods.
Generally, they go largely unnoticed, but
that doesn’t mean that they aren’t a prob-
lem. The UK-based Institute for Govern-
ment says, “It is non-tariff barriers that
are the real impediment to international
trade today.”
There are two key areas of such trade
impediments that the world needs to
worry about. First are plant and animal
health regulations. Such edicts may be
reasonable at face value. Who wouldn’t
want safe food to eat and humane treat-
ment of animals? However, the prob-
lem is that different countries frequently
have vastly different ideas as to what
is the right thing to do. For instance,
recent discussions between the United
Kingdom and the United States show dif-
ferences in food safety and animal welfare.
While America’s poultry businesses rinse
chicken carcasses in chlorinated water,
Britain is unhappy with such practices.
Deciding which position is correct may
depend entirely on where you sit, making
similar disagreements a knotty problem
for negotiators.
The second set of non-tariff barriers
listed in the UN report are requirements
for labeling, manufacturing and coun-
try content. These requirements generally
place a burden of increased paperwork
and bureaucracy on companies. Effec-
tively, the fact that there is no explicit
cost doesn’t mean there isn’t an addi-
tional financial weight imposed on foreign
goods. In some, but not all cases, compa-
nies may get so buried in paperwork that
the costs all but preclude doing business in
a given country.
The UN report says that while such
non-tariff measures were relatively lim-
ited in Asia two decades ago, they have
increased steadily in the intervening years.
That period also coincided with falling
tariff levels in the region. Or, put another
way, one trade barrier is at least partially
getting replaced by the other.
Perhaps the most worrying thing for
trade is a rise in inward-looking politi-
cal populism. At its worst, that threatens
to reverse globalization, writes Professor
Harold James in the Annual Review of
Financial Economics. Such movements in
the United States, United Kingdom and
other places have become increasingly
influential in their efforts to undo free
trade as we have come to know it. James
sees an eerie parallel with the efforts to
deglobalize that took place just before
WWI, when countries routinely used as
a method “of compensating losers” from
trade. That is, of course, something we
saw over the past couple of years in the
United States.
James writes, “Globalization depends
on a complex system of regulating cross-
border flows and on embedding domes-
tic rules in an international order.” But
these political populists now want to cast
aside those rules as irrelevant and instead
offer a dream that life would be better
with lower levels of trade and with fewer
“international entanglements.” Hence, we
get promises of higher trade barriers. To
the extent that voters buy into such nar-
ratives, then globalization and trade as we
know it may slow or even reverse. That’s
something to worry about. 
14    FINANCIAL HISTORY  |  Spring 2020  | www.MoAF.org
Simon Constable is a fellow at the Johns
Hopkins Institute for Applied Economics,
Global Health, and the Study of Business
Enterprise. He is the co-author of the
best-selling book, The Wall Street Journal
Guide to the 50 Economic Indicators
that Really Matter. He contributes a
regular column to the Wall Street Jour-
nal and writes regularly for other leading
publications.
Sources
Fouquin, Michel and Jules Hugot. “Two Cen-
turies of Bilateral Trade and Gravity Data:
1827–2014.” CEPII Working Paper 2016- 14,
May 2016. CEPII, using “Tariff Rate, Applied,
Weighted Mean, All Products (%).” Data,
World Bank, January 2020.
James, Harold. “Deglobalization: The Rise
of Disembedded Unilateralism.” Annual
Review of Financial Economics. 2018.
Institute for Government. “What is a Non-
tariff Barrier?”
Levi Strauss & Co. “Levi’s 501 Jean Global Pro-
duction Footprint.” 2015.
Moss, Trefor. “Coronavirus Epidemic Further
Dents China’s Auto Market.” Wall Street
Journal. February 13, 2020.
Smith, Adam. The Wealth of Nations. 1776
Tariff data prepared by Steve Hanke using
information from World Bank and IMF.
United Nations. “Asia-Pacific Trade and
Investment Report 2019: Navigating Non-
tariff Measures towards Sustainable Devel-
opment.”