A closer look at Non-Tariff MeasuresPosted on Wednesday, August 1st, 2012 in Hot Seat Comments
JB Cronjé, a tralac Researcher, discusses non-tariff measures.
The focus of this year’s World Trade Report that was recently published by the World Trade Organization falls on non-tariff measures. Non-tariff measures can serve legitimate public policy objectives, but they can also be designed and applied in a manner to frustrate trade. The report examines the reasons why governments use non-tariff measures and their impact on international trade. The range of non-tariff measures is vast and complex and ever-changing. As a result, the report focuses on technical barriers to trade regarding standards for manufactured goods, sanitary and phytosanitary measures concerning food safety and animal and plant health, and domestic regulation in services.
Governments often use non-tariff measures such as technical barriers to trade and sanitary and phytosanitary measures, taxes and subsidies to achieve public policy objectives including correcting market failures and pursuing non-economic objectives such as the protection of public health. Non-tariff measures can promote trade in some cases, but in many other they restrict it. It is difficult to distinguish between legitimate and protectionist motivations for non-tariff measures as the same measure can be employed to achieve public policy objectives and for protectionist purposes. Domestic political and economic constraints as well international constraints can influence a government’s choice of non-tariff measure. An analysis of the non-tariff measures show that the nature of many measures compared to tariffs or other policy instruments allows governments to conceal the real motivation behind them in order to satisfy producer lobby groups. In addition, the conclusion of international trade agreements constrains a government’s ability to pursue certain trade policies. As tariffs and other trade measures increasingly become unavailable to governments, certain behind–the-border measures such as technical barriers to trade and sanitary and phytosanitary measures are used to influence trade. Similarly, trade in services plays an important role in supporting international production networks. However, regulatory measures, mostly applied behind the border, are in many cases the only form of trade protection. As a result, measures that restrict trade and competition in services can have significant spill over effects on other services and goods.
A number of studies suggest that the trade effects of non-tariff measures and services measures are significant, perhaps even more so than tariffs. Existing literature, which quantifies the effect of non-tariff measures by estimating an ad-valorem tariff equivalent, indicates that non-tariff measures almost double the level of trade restrictiveness imposed by tariffs; that the average ad-valorem tariff equivalent for agricultural products appears much higher than that for manufactured goods; and, that the relative contribution of non-tariff measures to the overall level of protection increases as countries become richer. The degree of restrictiveness of services measures is generally higher in developing countries than in developed countries.
In general, technical barriers to trade and sanitary and phytosanitary measures have negative effects on trade in fresh and processed goods, but positive effects for more technologically advanced sectors. It has also been argued that technical barriers to trade and sanitary and phytosanitary measures represent a fixed cost to enter a new market and as a result affect not only how much two countries trade but also the number of countries with whom they trade. A study on sanitary and phytosanitary measures indicates that conformity assessment measures have a stronger negative impact on food and agriculture trade than regulations on product characteristics. The report also shows that the harmonisation of technical barriers to trade and sanitary and phytosanitray measures increased the presence of small and medium-sized firms in export markets.
The proliferation of global production chains and the use of private standards create the need for countries to develop rules to facilitate cooperation in the identification of efficient and legitimate uses of non-tariff measures.
Source: World Trade Organization Secretariat, 2012. World Trade Report 2012 – Trade and Public Policies: A Closer Look at Non-Tariff Measures in the 21st Century.