Magazine article International Trade Forum

Trade and Public Policies a Closer Look at Non-Tariff Measures in the 21st Century

Magazine article International Trade Forum

Trade and Public Policies a Closer Look at Non-Tariff Measures in the 21st Century

Article excerpt

The World Trade Organization's (WTO) World Trade Report 2012 takes a fresh look at non-tariff measures (NTMs). NTMs are nothing new, they have existed since countries started to trade and been subject to General Agreement on Tariffs and Trade disciplines since 1947. As tariffs have come down, however, NTMs have acquired growing importance. At the same time, changes in the trading environment have brought about a transformation of NTMs, raising new challenges in the multilateral trading system. This transformation and the challenges it raises are the topic of this year's World Trade Report.

The report focuses on technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures. Trends in the use of NTMs in the past 20 years are difficult to establish due to data limitations, but there is considerable evidence that TBTs and SPS measures have become more important, both in absolute terms and relative to other measures. The number of notifications of both TBTs and SPS measures has followed an upward trend and, at least in the case of TBTs, the number of specific trade concerns raised in the WTO TBT committee has increased.

There is now clear evidence of the predominance of SPS measures and TBTs over other NTMs, both in new data collected by the United Nations Conference on Trade and Development from official sources, such as government and international organization publications, and in responses to business surveys conducted by ITC. According to ITC, surveys of firms in 11 developing and least developed countries show that about hall of the NTMs considered to be burdensome are TBTs and SPS measures. For exporters, business surveys also show that more than 70% of burdensome NTMs raise a procedural obstacle.

The growing importance of TBTs and SPS measures relative to more traditional measures, such as quotas or contingent protection, reflects a trend whereby NTMs increasingly address concerns about health, safety, environmental quality and other social imperatives. Given that these concerns are taking a more central role in policy as economies develop and incomes grow, the trend is unlikely to weaken in coming years. Moreover, with the expansion of global production sharing, product and process standards are becoming increasingly relevant in linking various stages of international production chains. This suggests public policy related NTMs will not decline in importance.

Trade effects of NTMs

TBTs and SPS measures can be burdensome for exporters, but they are not ordinary trade restrictions. Their trade effects, which can be positive or negative, depend on various factors. First, the trade impact varies according to how measures are applied or administered. The procedural obstacles most commonly mentioned by developing and least developed country exporters in ITC business surveys are time constraints, including delays related to regulations and short deadlines to submit documentation.

These constraints represent 35% of obstacles reported. Issues of time are followed by unusually high or informal payments, which represent 22% of obstacles reported. Second, even more than the measures themselves, differences between national policies can substantially raise trade costs and reduce or distort trade flows.

The actual trade effects of NTMs are difficult to assess. Economists often calculate ad valorem tariff equivalents of NTMs. This can be done either by using the so-called price-gap approach, or by comparing observed imports with an estimate of what imports would be under free trade and converting the quantity gap into a price gap using the price elasticity. This approach does not allow for decomposition by specific measure of the aggregate.

While public policies need not be trade distorting or trade restricting in and of themselves, they may be designed to create an intentionally protectionist effect while serving a public policy objective. …

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