the increasing role of non-tariff measures in ... nov... · non-tariff measures are policy...

The Increasing Role of Non-Tariff

Measures in International Trade

Samuel Rosenow

[email protected]

Bangkok, Thailand - November 28, 2018

Trade Analysis Branch

Division on International Trade and Commodities

UNCTAD

dataknowledge

wisdom

information

1. Introduction to NTMs

2. Improving transparency of NTMs

3. Stylized facts

4. NTM policy-making

5. Reflections on the region

6. Q&A session

Contents

Trade regulation are ubiquitous


Definition:

Non-Tariff Measures are policy measures, other than ordinary

customs tariffs, that can have an effect on international trade …” (UNCTAD Group of Eminent Persons on NTBs)

NTMs include a broad range of policy instruments including:

1. traditional trade policy instruments, such as quotas and

price controls, and rules of origin as well as

2. regulatory and technical measures that stem from

important non-trade objectives related to health and

environmental protection

• Sanitary and Phytosanitary (SPS) measures and

• Technical Barriers to Trade (TBT)


MFN tariff rates

PTA tariff rates

Border clearance costs

Non-tariff measures

Transport and logistics costs

Costs of compliance with RoOs

1. Introduction to NTMs: structure of trade costs

NTMs may pursue legitimate public policy objectives


• Industrial policy: – Regulate domestic markets (pricing mechanisms)

– Help domestic firms (subsidies)

• Trade policy: – Avoid unintended spillovers (rules of origin)

– Favoring some trading partners (quota allocation)

• Foster economic interdependency – Mechanism to integrate production processes across countries to

address distortions affecting trade and investment (common rules,

standards)

• SPS measures

– Human, animal and plant

health…

• …related to additives,

contaminants, toxins,

diseases, pests

• TBT measures

– Human health…

• … other than SPS

– Protection of the

environment

– National security

• Limits on the use of pesticides ensure safe food SPS

• Safe packaging requirements for food TBT

• Restrictions on toxins in toys protect our children TBT

• Emission restrictions for cars TBT

• Seat belt safety requirements TBT

Examples:


• Social and environmental policy:

NTMs may pursue legitimate public policy objectives

• Lack of transparency/

information costs

• Conformity assessment

– Lack of domestic technical

infrastructure

– Lack of mutual recognition

– Redundant checks

• ….

• More stringent requirement

than international

standards

• Not science-based

• Lack of harmonization of

requirements

• Discriminatory

Procedural implementation Requirement

Yet, NTMs may also prove barriers to trade


WHAT IS NEEDED?

I. Specification of the food

II. Effect of the production process applied to the food

III. History of the organism used as the source of the food

IV. Specificity of expression of novel genetic material*

V. Ability of the material to survive in and colonize the human gut*

VI. Anticipated intake/extent of use of the food

VII. Information from previous human exposure to the food or its source

VIII. Nutritional information on the food*

IX. Microbiological information on the food*

X. Toxicological information on the food*

* Done by recognized lab (i.e. in the EU)

APPROXIMATE TOTAL COST:

500,000 – 1’000,000 EUR

UP TO 5 YEARS FOR APPROVAL


Example: requirement of new fruit to the European Union


• Principle of efficient regulations: policy effort is critical to

ensure that NTMs serve their intended legitimate purposes.

– Efficient regulations are essential for addressing

domestic concerns while not decreasing

competitiveness (e.g. subsidies should be temporary)

– NTMs can have large spillovers and therefore should

be precisely targeted to the market failures they are

trying to correct (e.g. health protection based on science

and not lobbies)

• Economic assessment based of cost (implementation)

benefit (purpose) analysis

Policy implications for the domestic economy

2. Improving transparency of NTMs

Transparency and good regulations are key

Methodology

classification

data selection

Datacollection

classifyingNTMs

qualitycontrol

Data Dissemi-nation

makingdata

freely

available

AnalyticalTools

PolicySupport

to Policy Makers

and policy

makingprocesses

Guides the concept and data collection

Transparency Good Regulations

Multi Agency Support Team

(FAO, IMF, ITC, OECD,

UNCTAD, UNIDO,

World Bank, WTO)

updated NTM classification

Classification of NTMs:

2.1 Methodology

A SANITARY AND PHYTOSANITARY MEASURESA1 Prohibitions/restrictions of imports for SPS reasons

A2 Tolerance limits for residues and restricted use of substances

(…)A8 Conformity Assessment related to SPS

A81 Product registration requirementA82 Testing requirement

A83 Certification requirement

A84 Inspection requirementA85 Traceability requirement

A851 Origin of materials and parts

A852 Processing historyA853 Distribution and location of products after

deliveryA859 Traceability requirements n.e.s.

A86 Quarantine requirement

A89 Conformity assessments related to SPS n.e.sA9 SPS Measures n.e.s.

B TECHNICAL BARRIERS TO TRADE

C PRE-SHIPMENT INSPECTION AND OTHER FORMALITIES D CONTINGENT TRADE PROTECTIVE MEASURES

E NON-AUTOMATIC LICENSING, QUOTAS, PROHIBITIONS …F PRICECONTROL MEASURES INCLUDING ADDIT. TAXES …

G FINANCE MEASURES

H MEASURES AFFECTING COMPETITION

I TRADE-RELATED INVESTMENT MEASURES

At 4-digit level of coding:

177 measure codes

Available at

unctad.org/ntm

Classification of NTMs – example:

2.1 Methodology

From here To here

2.2 Data collection

Information collected:

Basic statistical information

• Type of NTM

• Associated product/s (HS6 of tariff line)

• Country imposing the measure

• Country to which the measure is imposed

But also available

• Date entry into force

• Name of legal text

• Text description of the requirement

• Government department responsible

• Other… 67 variables

2.2 Data collection

Available at:

• trains.unctad.org

• wits.worldbank.org

NTMs are collected in 109 countries, or 95% of trade

2.3 Data dissemination

2.4 Analytical tools

1. NTM indicators:

– Descriptive indicators

• Frequency Ratio

• Coverage Ratio

• Prevalence Score

– Ad-valorem Equivalents of NTMs

– Regulatory Distance

– Regulatory Stringency

– Cost-effectiveness evaluation tool

2. Policy papers:

– Sectorial studies:

• Fish

• Agriculture

– Tools and methods for assessing the implication of NTMs

2.4 Analytical tools

• The Frequency Index captures a country’s share of traded product

lines subject to at least one NTM.

• The Coverage Ratio captures a country’s share of trade subject to

NTMs. Unlike the Frequency Index, it is weighted by import values,

rather than using traded product lines.

• The Prevalence Score indicates a country’s average number of distinct

NTMs applied on regulated products captures intensity of regulating

NTMs indicators

Frequency Coverage Prevalence

Product NTM Import value

A Yes 40 10

B Yes 40 6

C No 10

D No 10

Index 50% 80% 6

NTMs matter increasingly

NTM notifications at WTO and tariffs, 2003-2017

Source: WTO, 2018

3. Stylized facts

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

0

1000

2000

3000

4000

5000

6000

7000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Average tariff (%)Number of NTMs Tariffs and NTMs in ASEAN, 2000-2015

SPS TBT Pre-shipment inspection

Contingent and protective measure Non-automatic licensing, quotas, prohibitions Price control

Finance measure measures affecting competition Trade-related investment measures

distribution restriction restriction on post-sales subsidies

Government procurement restrictions Intellectual property Rules of Origin

Export related measures Average Tariff: Effectively Applied Rate (RHS) Average Tariff: MFN (RHS)

… particularly in ASEAN

Source: ERIA, 2018

3. Stylized facts

Imp

ort

measu

res

Frequency Index

Coverage RatioPrevalence Score

0 0.2 0.4 0.6 0.8 1

Metals

Stone / Glass

Plastics / Rubbers

Wood & Wood Products

Miscellaneous

Footwear / Headgear

Mineral Products

Machinery / Electrical

Chemicals & Allied Industries

Raw Hides, Skins, Leather, &…

Transportation

Textiles

Foodstuffs

Vegetable Products

Animal & Animal Products

Coverage Ratio Frequency Index

0 2 4 6 8 10 12

Prevalence Score

Agriculture is most regulated, both at intensive and extensive margin

3. Stylized facts

Developed countries resort to TBT measures,

while LDCs use export measures

Source: UNCTAD and WBG, 2018

0

0.2

0.4

0.6

0.8

1

LD

C

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ve

lop

ing

De

ve

lop

ed

LD

C

De

ve

lop

ing

De

ve

lop

ed

LD

C

De

ve

lop

ing

De

ve

lop

ed

LD

C

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ve

lop

ing

De

ve

lop

ed

LD

C

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ve

lop

ing

De

ve

lop

ed

LD

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ve

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ing

De

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LD

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lop

ed

LD

C

econ

om

ies

econ

om

ies

SPS TBT Pre-Shipment Quantity Price Finance Other Export

Frequency Index Coverage Ratio

3. Stylized facts

NTMs have become more restrictive than tariffs

Source: UNCTAD and WBG 2018 Source: UNCTAD and WBG, 2018

3. Stylized facts

NTMs exhibit differential impact across regions


3. Stylized facts

Poor countries face greater costs in export markets


0

2

4

6

8

10

12

14

16

5 6 7 8 9 10 11 12

AV

E p

er

cen

t

Log GDP per capita

3. Stylized facts

Instruments to address NTMs:

• Domestic Coherence:

– SDGs may lead to increased regulatory activity to "directly"

regulated sustainability…

– but "indirect" linkages must not be ignored

Coherent policy making requires that responsible

agencies/ministries assess costs and benefits of NTMs

• Policy coordination across institutions/ministries is crucial

• International Convergence:

– Harmonization of requirements

– Equivalence

– Mutual recognition

can reduce trade costs while maintaining beneficial

sustainability effects


Unilateral

Bilateral

Plurilateral

Multilateral


Approaches:


• Ex ante (before issuing regulations)

– Advance notification/ consultation of stakeholders and

the public

– Assessment of potential impacts of future regulation

• Ex post (after implementation)

– Evaluation of regulation performance in delivering the

intended outcomes

Elements:

Le

ve

l o

f re

gu

lato

ry s

trin

ge

ncy

Convergence – but how and towards where?

International standard

(e.g. Codex)

Starting

point

Adopt international

standard to enhance

intra- and extra regional

trade + sustainability

Adopting Northern

standard as domestic

requirement can harm

South-South trade

Regional harmonization

promotes intra-regional

trade


Regulatory convergence can reduce impact by ~25%-5 -3 -1 1 3 5 7 9 11

Animals & meat

Vegetable products

Fats & oils

Beverages & tobacco

Minerals

Chemicals

Plastics

Leather

Wood products

Paper

Textile and clothing

Footwear

Stone & glass

Precious metals

Metals manufactures

Machinery

Vehicles

Optical & med. Instr.

price reduction: potential convergence

current price effect of technical import measures

Source: UNCTAD and ERIA 2018 (forthcoming)


5. Reflections on the region

1. NTMs are on the rise in ASEAN

2. Data updates: better data will help understand the intricacies of it

– NTM data updates for 10 ASEAN countries are currently

underway

– Reflecting latest regulations and validated previous data

3. ASEAN Trade Facilitation Joint Consultative Committee (ATF-JCC)

endorsed NTM database as the primary data source for national

trade repositories (July 2018):

– For its sustainability, UNCTAD and its regional partner ERIA will

develop the capacity of agencies to conduct NTM data collection,

classification, analysis and validation (summer 2019)

4. ASEAN Economic Community (AEC) will use NTM database its

regional trade facilitation action plan. Specifically, it is used to put

in place an effective and responsive regional approach to efficiently

address the trade distorting effect of NTMs.

Samuel [email protected]

Appendix: Ad-valorem equivalents of NTMs

• AVEs are price effects of NTMs, in percentage terms of

trade flow

• Econometric methodology:

1. Construct the proportionate change in quantity imported due

to the presence of of NTMs, using gravity trade model:

2. Use the elasticity of trade with respect to a 1 percentage

point increase in the tariff to convert the proportionate

change in quantity imported due to NTMs in terms of AVEs

• Limitations:

• AVEs are currently NTM measure blind and intensity blind

• NTMs are heterogeneous and vary in stringency e.g.

TBT/SPS, TRIMs, ROO, subsidies, services

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Finance

Other

QuantityControl

Pre-Shipment

PriceControl

SPS

Export

TBT

Coverage Ratio Frequency Index

Technical Barriers to Trade are most usedFrequency Index and Coverage Ratio Prevalence Score

0 2 4 6

Prevalence Score

Regulatory cooperation

should be pursued at

multiple levels

Regulatory reassessment at the

national level is important to ensure

coherent policy measures

Appendix: Stylized facts

NTM correlate with GDPpc and average tariffs

Covera

ge R

atio

Pre

vale

nce S

core

0

0.2

0.4

0.6

0.8

1

6 7 8 9 10 11 12

Covera

ge R

atio

GDP per capita, in log

0

1

2

3

4

5

6

7

6 7 8 9 10 11 12

Pre

vale

nce S

core

GDP per capita, in log

0

0.2

0.4

0.6

0.8

1

- 5.00 10.00 15.00

Covera

ge R

atio

Tariffs, weighted average

0

1

2

3

4

5

6

7

- 5.00 10.00 15.00

Pre

vale

nce S

core

Tariffs, weighted average

GDP per capita (ln) Tariffs (weighted average)

Getting it

right now

Enhancing

transparency

Appendix: Stylized facts

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