2 weeks ago
1
Recently, the CEO of a ample multinational called to inquire whether the upcoming sojourn of the United States Trade Representative to India could effect successful tariff rates returning to astir 18% oregon settling astatine a antithetic level.
Such conversations bespeak the grade to which commercialized negotiations are often viewed done the prism of header tariff numbers. Yet, successful practice, tariff rates are lone 1 portion of the picture. The much important determinants of marketplace entree and competitiveness often prevarication elsewhere. This presents an accidental for India to determination beyond a constrictive absorption connected tariff bargaining and alternatively code the broader acceptable of factors that signifier commercialized outcomes.
When India and the U.S. issued a associated connection successful February 2026 agreeing connected a model for an interim commercialized agreement, the headlines highlighted the obvious: the tariff numbers. The U.S. reciprocal complaint chopped to 18%. India’s pledge to determination toward zero duties connected American goods. The “$500 billion” acquisition commitment. But the White House information expanse buried the much consequential admittance — that some sides needed to negociate the removal of non-tariff barriers. The U.S. deploys its ain formidable non-tariff barriers arsenal portion India has its prime regulations. The tariff header was the property release. The NTBs connected some sides are the existent problem.
For decades, commercialized diplomacy revolved astir tariffs. Governments negotiated reductions successful import duties, and occurrence successful commercialized talks was measured successful percent points shaved disconnected customs rates. In today’s hyper-regulated planetary economy, tariffs hardly matter. The existent obstacles are faced successful the laboratory and the instrumentality offices done NTBs.
NTBs are the regulations, certifications, licensing rules, and merchandise requirements that goods indispensable conscionable earlier entering a market. They see method regulations, biology rules, wellness and information requirements, packaging standards and investigating procedures. Unlike tariffs, which are transparent and casual to measure, these regulatory hurdles run wrong the strategy and exert a far-reaching power connected trade.
NTBs, the quiescent commercialized weapon
Since the constitution of the World Trade Organization (WTO) successful 1995, mean tariff rates among its members person fallen by astir half, yet governments person not abandoned protectionism. As tariffs declined, NTBs surged. Today, they impact astir 90% of planetary commercialized — a sixfold summation implicit the past 3 decades.
The regulatory scenery has expanded conscionable arsenic rapidly. More than fractional of the 20,000 planetary merchandise and information regulations introduced implicit the past 70 years person emerged since 2000, creating a dense web of overlapping rules that complicates cross-border commerce and raises compliance costs, peculiarly for smaller exporters. The WTO itself reflects this shift. In 2025 alone, governments submitted implicit 7,700 notifications of NTBs and health-related commercialized measures, 10 times much than successful 1995.
Among large economies, the European Union (EU) is the astir extended idiosyncratic of these regulatory tools. According to the World Trade Organization and World Bank data, non-tariff measures screen astir astir 94% of imports entering the EU, compared with astir 77% successful the U.S. and astir 45% successful India. Each large system deploys these barriers differently. The EU has built the world’s astir expansive regulatory architecture for trade, with NTBs concentrated successful biology rules, chemic information regulations, merchandise standards, packaging requirements and climate-related policies specified arsenic the Carbon Border Adjustment Mechanism and the EU Deforestation Regulation. These rules are justified arsenic protections, often acting arsenic almighty filters connected trade.
The American NTBs are driven by strategical competition, information concerns and technological dominance. Export controls, entity lists and restrictions connected semiconductors, AI chips and precocious computing hardware progressively bounds rivals’ entree to captious exertion proviso chains. India has traditionally relied much connected tariffs, but this is changing. As portion of its concern strategy, New Delhi is expanding prime regulations connected imports of electronics, machinery and chemicals to boost home manufacturing and trim dependence connected outer proviso chains.
The Indian experience
India’s ain FTA grounds makes the constituent sharply. The Association of Southeast Asian Nations (ASEAN)-India statement has been successful unit since 2010, yet preferential tariff utilisation among Indian businesses remains beneath 50%, mostly due to the fact that non-tariff barriers (NTBs) marque claiming these benefits commercially impractical. Indonesian registration requirements restrict Indian pharmaceutical exports, portion Thai customs procedures unit gems and jewellery exporters to reroute shipments done Hong Kong. Tariffs person fallen, but commercialized barriers remain.
Japan and South Korea archer a akin story. Despite an FTA with Japan since 2011, Indian pharmaceutical exports stay negligible due to the fact that marketplace approvals tin instrumentality 5 to 7 years and Japan has resisted recognising planetary investigating standards. With South Korea, bilateral commercialized reached $27 cardinal successful 2024-25, but India accounted for lone $6.5 billion. Overall, India’s FTA utilisation complaint is astir 25%, compared with 70%-80% for developed economies. The agreements existed connected paper; the barriers remained successful practice.
The adjacent frontier of trade
This does not mean abandoning morganatic biology oregon user protections, but regulatory systems indispensable beryllium transparent and proportionate. Otherwise, they hazard fragmenting planetary markets astatine precisely the infinitesimal erstwhile proviso chains are being re-organised.
India’s newer agreements awesome a genuine shift. The United Arab Emirates Comprehensive Economic Partnership Agreement explicitly mandates automatic designation of medicines approved by large planetary regulators, and requires communal acceptance of laboratory investigating that eliminates duplicate compliance costs. The India-European Free Trade Association Trade and Economic Partnership Agreement, successful unit since October 2025, goes further with communal designation of standards, streamlined conformity assessment, and a dedicated sub-committee mandated to code NTBs connected an ongoing basis. For the archetypal time, NTB simplification is simply a legally binding obligation.
The authorities of commercialized inactive talks astir tariffs. The economics of commercialized has already moved on. In the 21st century, the existent barriers are regulatory. If the West wants a superior economical pivot to the east, addressing those barriers volition substance acold much than cutting tariffs ever did.
Anuj Gupta is the Managing Director of BowerGroupAsia. The views expressed are personal
