The Increasing Role of Non-Tariff Measures in International Trade

Transcription

1 The Increasing Role of Non-Tariff Measures in International Trade Samuel Rosenow Bangkok, Thailand - November 28, 2018 Trade Analysis Branch Division on International Trade and Commodities UNCTAD wisdom data information knowledge

2 Contents 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

3 1. Introduction to NTMs Trade regulation are ubiquitous

4 1. Introduction to NTMs 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)

5 1. Introduction to NTMs: structure of trade costs MFN tariff rates PTA tariff rates Transport and logistics costs Border clearance costs Costs of compliance with RoOs Non-tariff measures

6 1. Introduction to NTMs 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)

7 1. Introduction to NTMs NTMs may pursue legitimate public policy objectives Social and environmental policy: SPS measures TBT measures Examples: Human, animal and plant health related to additives, contaminants, toxins, diseases, pests 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

8 1. Introduction to NTMs Yet, NTMs may also prove barriers to trade Procedural implementation Lack of transparency/ information costs Conformity assessment. Lack of domestic technical infrastructure Lack of mutual recognition Redundant checks Requirement More stringent requirement than international standards Not science-based Lack of harmonization of requirements Discriminatory

9 1. Introduction to NTMs Example: requirement of new fruit to the European Union 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 EUR UP TO 5 YEARS FOR APPROVAL

10 1. Introduction to NTMs Policy implications for the domestic economy 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

11 2. Improving transparency of NTMs Transparency and good regulations are key Transparency Good Regulations Methodology classification data selection Data collection classifying NTMs quality control Data Dissemination making data freely available Analytical Tools Policy Support to Policy Makers and policy making processes Guides the concept and data collection

12 2.1 Methodology Classification of NTMs: Multi Agency Support Team (FAO, IMF, ITC, OECD, UNCTAD, UNIDO, World Bank, WTO) updated NTM classification

13 2.1 Methodology Classification of NTMs example: A SANITARY AND PHYTOSANITARY MEASURES A1 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 requirement A82 Testing requirement A83 Certification requirement A84 Inspection requirement A85 Traceability requirement A851 Origin of materials and parts A852 Processing history A853 Distribution and location of products after delivery A859 Traceability requirements n.e.s. A86 Quarantine requirement A89 Conformity assessments related to SPS n.e.s A9 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

14 2.2 Data collection From here To here

15 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

16 2.3 Data dissemination NTMs are collected in 109 countries, or 95% of trade Available at: trains.unctad.org wits.worldbank.org

17 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

18 2.4 Analytical tools NTMs indicators 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 Frequency Coverage Prevalence Product NTM Import value A Yes B Yes 40 6 C No 10 D No 10 Index 50% 80% 6

19 3. Stylized facts NTMs matter increasingly NTM notifications at WTO and tariffs, Source: WTO, 2018

20 3. Stylized facts particularly in ASEAN Number of NTMs Tariffs and NTMs in ASEAN, Average tariff (%) SPS TBT Pre-shipment inspection Source: ERIA, 2018 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)

21 Import measures 3. Stylized facts Agriculture is most regulated, both at intensive and extensive margin Frequency Index Coverage Ratio Prevalence Score Animal & Animal Products Vegetable Products Foodstuffs Textiles Transportation Raw Hides, Skins, Leather, & Chemicals & Allied Industries Machinery / Electrical Mineral Products Footwear / Headgear Miscellaneous Wood & Wood Products Plastics / Rubbers Stone / Glass Metals Coverage Ratio Frequency Index Prevalence Score

22 LDC Developing Developed LDC Developing Developed LDC Developing Developed LDC Developing Developed LDC Developing Developed LDC Developing Developed LDC Developing Developed LDC economies economies 3. Stylized facts Developed countries resort to TBT measures, while LDCs use export measures SPS TBT Pre-Shipment Quantity Price Finance Other Export Frequency Index Coverage Ratio Source: UNCTAD and WBG, 2018

23 3. Stylized facts NTMs have become more restrictive than tariffs Source: UNCTAD and WBG, 2018

24 3. Stylized facts NTMs exhibit differential impact across regions Source: UNCTAD and WBG, 2018

25 AVE per cent 3. Stylized facts Poor countries face greater costs in export markets Log GDP per capita Source: UNCTAD and WBG, 2018

26 4. NTM policy-making 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

27 4. NTM policy-making Approaches: Unilateral Bilateral Plurilateral Multilateral

28 4. NTM policy-making Elements: 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

29 Level of regulatory stringency 4. NTM policy-making Convergence but how and towards where? Adopting Northern standard as domestic requirement can harm South-South trade Regional harmonization promotes intra-regional trade Starting point International standard (e.g. Codex) Adopt international standard to enhance intra- and extra regional trade + sustainability

30 4. NTM policy-making Regulatory convergence can reduce impact by ~25% 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)

31 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.

32 Samuel Rosenow

33 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

34 Appendix: Stylized facts Technical Barriers to Trade are most used Frequency Index and Coverage Ratio Prevalence Score TBT Export SPS PriceControl Pre-Shipment QuantityControl Other Finance Coverage Ratio Frequency Index Prevalence Score Regulatory cooperation should be pursued at multiple levels Regulatory reassessment at the national level is important to ensure coherent policy measures

35 Prevalence Score Prevalence Score Prevalence Score Coverage Ratio Coverage Ratio Coverage Ratio Appendix: Stylized facts NTM correlate with GDPpc and average tariffs Enhancing transparency GDP per capita, in log Tariffs, weighted average Getting it right now GDP per capita, in log Tariffs, weighted average GDP per capita (ln) Tariffs (weighted average)