A nontariff barrier is any policy or procedure that restricts imports but is not a tariff. Tariffs are government taxes on imports and exports that are used to control the balance of trade between one country and another. There are a wide range of national policies and procedures that can have the effect of restricting imports, ranging from national quality standards to unreasonable customs procedures. Generally, nontariff barriers can be grouped into three categories: barriers that directly aim to limit imports to protect a national interest, barriers that are regulatory and have the effect of limiting imports, and indirect barriers.
International trade organizations seek to promote global free trade, or open access to markets without restrictions. From a free trade perspective, a company in China should have unfettered access to the US market and vice versa. Demand for products should be the ultimate equalizer, and people should be able to make purchasing decisions based on their own needs and not a national government agenda.
Although free trade seems to be the ultimate expression of market capitalism, in reality countries want to protect their own industries, keep their workers employed and grow their economies. A country's economy depends on the balance of trade between it and other countries. In other words, governments strive to export more than it needs to import, or at least achieve an equal balance. If outside imports exceed exports, it can decimate a national industry and negatively impact economic production. A greater number of imports means that fewer works were employed to make goods at home.
To control imports, governments have traditionally imposed tariffs. Taxing imports makes it more expensive for other countries to access the national market. Imposing a tariff is a very direct way of trying to limit imports and is out of favor with international trade organizations. A nontariff barrier, however, can achieve the same result as a tariff without the government setting a specific import policy.
There are generally three categories of nontariff barriers. The first category directly aims to limit imports to protect an important national interest, such as the preservation of a particular industry or the promotion of a public interest such as lowering unemployment. An example of a nontariff barrier is an export subsidy or a customs surcharge on imports.
The second category includes barriers that are regulatory and have the effect of limiting imports. These barriers apply to national and foreign companies equally, but it tends to be harder for the foreign company to meet these standards because of the state of its industry. An example of a nontariff barrier of this type is a safety regulation for children's toys that is standard in one country but hard to implement by the importer.
Finally, indirect nontariff barriers are a third category. It includes any measure that is not intended as a trade restriction but has that effect. Examples include local laws and customs and traditions that have the unintended effect of discouraging the purchase of foreign products.