A non-tariff barrier is a barrier restricting trades that relates to imports. The use of non-tariff barriers is on the rise today, and it overshadows the use of tariff barriers to trade. They help in the protection of the health, safety, sanitation and depletion of natural resources that may affect the wellbeing of the citizens. Though some non-tariff barriers do not directly relate to the regulations of foreign trade, they have a significant effect on the economic activities in the foreign trades. There are various non-tariff barriers United Arab Emirates government imposes, and they have both positive and negative impacts on trade in the region.
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Every importer must adhere to the rules set by the government for them to remain in the imports business. The quota system leads to a high increase in the prices of imports since the demand is high, and the supply is small then the prices will automatically rise. Different governments have their methods of imposing the quotas; some prefer the auctioning of the quotas. Auctioning means that the government prints out licenses at the beginning of the year and then auction them in an open market, which is highly competitive, and the highest bidders get the licenses. There is also the option that the bidder who gets the license and they are not able to stay in the market they can sell the ticket to other importers. Economists will prefer this method since they reap many benefits from it, but the governments hardly prefer this method of allocation (Alan, Robert,pg44). The quota allocation can also be through allocating the rights to import at fixed prices and they offer the licenses free to the firms that specialize in imports. The government gives the traders the cost variances in the domestic and international markets as rent and then the governments allocate them the licenses. In this case, the prices do not rise at a high rate since the competitors will tend to compete by price reductions, and this favors the economic status of the buyers. Political influence in such an allocation will hinder further sales of the licenses, but the economic power will allow reallocation of licenses to secondary owners. The method that any government allocates will lead to different effects on the trades, it is, therefore, important that the government adopts the one that will give rise to a less adverse impact on the economy.
The quota system has its effects on the economy; it leads to the rise of the prices above the world price. The increase in prices is due to the exploitation by the license holders and the competition that they face and the high demand for the products that force them to a raise the prices of the products. The quota system in this case reduces the quantity of imports and their demand. The quota system is more beneficial to both the domestic and the import sellers and but it is unfair to the buyers in both markets. It promotes local employment, means that there are more job benefits that lead to the rise of the living standards of the people and an improvement in the economy levels. The restriction of imports leads to a reduction in the foreign wages. It protects the infant industries against overshadowing by the major and already established companies, it allows them to grow and mature at their own pace however long it may take (Salvatici,pg7). The quota system may lead to unfair trade, of companies engaging in unfair trade to acquire the imports at low prices and sell them at lower the prices in the domestic market, the unfair business practices include dumping. There are corruption and smuggling of goods from one country to another.