TWN Info Service on WTO and Trade Issues (Jul16/19)
22 July 2016
Third World Network

UNCTAD-14: South losing $23 billion a year over G20 NTMs
Published in SUNS #8288 dated 22 July 2016

Nairobi, 21 Jul (Kanaga Raja) - The failure to comply with G20 non-tariff measures (NTMs) has resulted in developing countries losing an estimated $23 billion per year, about 10 percent of their exports to the G20, the UN Conference on Trade and Development (UNCTAD) has said.

On Tuesday (19 July), UNCTAD launched a database that aims to list the NTMs of some 56 countries, covering 80 percent of world trade.

According to a press release, this database will enable policymakers to search by country and product to find out quickly the relevant non-tariff requirements.

As tariffs have fallen to historic lows, UNCTAD said, NTMs have replaced them as a key brake on faster global trade growth. And the expansion of the middle classes in many countries is expected to increase demand for safer, cleaner products.

This in turn, said UNCTAD, may require Governments to introduce more non-tariff measures.

At a media briefing on Wednesday (20 July), Dr Amina Mohamed, President of the UNCTAD-14 conference, said that during the past decade, global tariff barriers in international trade have fallen significantly.

The tariffs on trade in both agricultural goods and industrial products have declined on average from about 19.9 percent to 6.7 percent, she said, adding that this decline has been due mostly to multilateral trade negotiations under the auspices of different organizations including UNCTAD, the WTO, as well as bilateral, regional and mega-regional arrangements.

Referring to an UNCTAD event on the issue the previous day, she said that this event raised the relative importance of non-tariff measures (NTMs) as both protectionist and regulatory trade instruments. The session yesterday on lowering trade hurdles focussed particularly on this core issue.

The common understanding from the discussion, Dr Mohamed said, was that tariff liberalization alone has generally proven unsuccessful in providing genuine market access drawing further attention to the role that NTMs play as major determinants in restricting market access.

NTMs include a very diverse array of policies that countries apply to imported and exported goods.

She underlined that UNCTAD has been actively involved in research and programmatic activities on issues that are related to NTMs since the 1990s, "so this is nothing new for UNCTAD."

In the 1990s the UNCTAD secretariat actually began to collect and classify NTMs according to a customized coding system of trade control measures.

It therefore launched a single database on NTMs that aims to lower trade costs. It contains statistics on 56 countries, and in this regard, investors will now have access to countries' database and data that is expected to enhance transparency on how countries actually trade, she said.

"It will help advance the agenda of eliminating trade barriers," Dr Mohamed added.

The UNCTAD press release has quoted Joakim Reiter, UNCTAD Deputy Secretary-General, as saying: "These kinds of measures are becoming increasingly widespread. For example, measures on the cleanliness and pathogen-free status of food - known as sanitary and phytosanitary measures - cover more than 60 percent of agricultural trade."

"Such regulatory measures disproportionately increase trade costs for small and medium-sized enterprises and developing countries, particularly the least developed. We estimate, for example, that the impact of the European Union's sanitary and phytosanitary measures comes to a loss of about $3 billion for low-income country exports. That's equal to 14 percent of their agricultural trade with the European Union."

"We certainly don't expect G20 countries to drop all their non-tariff measures, which serve important policy objectives such as health and safety, but we do need to manage this issue better," he added.

"Non-tariff measures are the new frontier in our quest for greater global trade," Reiter added.

He added that better information would reduce the costs of non-tariff measures. "It's all about transparency and harmonizing regulations."

According to the press release, policymakers can use the database, for example, to harmonize their regulations and accelerate the growth of regional trade. For example, the African Union has already requested UNCTAD to support them with the Continental Free Trade Area by setting up a similar database.

"The use of non-tariff measures in the world will increase but this should be done in a smart way, for example, by using international standards to a maximum extent," said Ralf Peters, Chief ad interim of the UNCATAD Trade Analysis Branch.

"Use non-tariff measures to protect your citizens, but don't let them compromise trade because that will block economic growth and job creation," he added.

Speaking to SUNS on Wednesday (20 July), Peters said that there are two broad categories of NTMs, one is traditional trade policies like quotas, price measures, Anti-Dumping measures and so on while the other category of NTMs is in technical areas such as product requirements, SPS requirements, and TBT requirements, "which we all want to have because they regulate and they protect consumers, health and the environment."

He said that it is a particular challenge for developing countries to meet those requirements in all countries, and in particular in developed countries that have very high standards.

For example, the requirements for mineral water are that they have to be free from pesticides, there are labelling requirements and it is often a fixed cost to meet the requirements.

"If you are a large producer from a large country that has all the accredited laboratories, it is relatively easy for you to export to the other markets but when you come from an LDC, there is no accredited laboratory to certify that you meet all the requirements and it is immensely costly to comply with the requirements in the other markets."

Peters said that it is a particular challenge for the LDCs, though the requirements are the same for everybody.

One of the main features of the database is that there is a comprehensive overview of all the NTMs in one particular country, he said.

Citing the US as an example, Peters said that there are around 10,000 measures in the country and "we read hundreds of thousands of pages of legal texts in the US."

"And you can go by product. For example, you are an exporter of say cut flowers, you can then look for all the regulations that you have to comply with in the US market for cut flowers. We have this now for 56 countries in the world that account for around 80% of world trade."

"The database uses the same approach worldwide so you can also compare what are the regulations in the US, the EU, Kenya, and Cambodia and so on. We can also look into how different the regulations are in these markets," said Peters.