Crossing non-tariff barriers

Smartinvestor, August 15, 2013
Non-tariff barriers (NTBs) have plagued global trade for years. Several attempts have been made in the past to tackle this problem. However, the problem persists as governments across the world have continued to impose these measures to protect domestic economy and in some cases for protecting the environment or human health.

A recent study by Consumer Unity & Trust Society, Jaipur, in collaboration with some South Asian academic institutions and endorsed by industry chambers in these countries, has come up with a fresh idea of promoting “participatory approach” for removal of NTBs in the South Asian region.

The study advocates active private sector involvement in identifying and addressing the barriers. The study states, “A greater level of involvement of the private sector in the formal system of NTB reforms is necessary for the success of this approach. This is because businesses possess data – quantitative as well as qualitative – on trade costs and they regularly undertake cost assessments, consider all potential alternatives and explore possible cost-saving avenues.” The study advocates that all stakeholders participate in addressing this problem which is hurting deeper economic integration of South Asia.

The study is of the view that since this would be an incentive-driven system, enforceability will have a secondary role to play. It strongly advocates a system with proactive participation with focus on economic costs and benefits, with transparency, with responsibility sharing between exporters and importers, business organisations, governments and other relevant stakeholders. Such a system, the study is of the view, would limit politicisation of trade reforms and would lessen the burden of reform process on the part of the governments. The key words for this system to effectively operate are “cooperation” and “participation”.

The study propagates the use of the South Asian Association for Regional Cooperation (SAARC) Chamber of Commerce for building such participation and cooperation. The result of such cooperation, the study states, would be an additional trade of $4 billion among SAARC countries.

The study, undoubtedly, provides a novel approach to addressing the long-standing problem of non-tariff barriers afflicting regional and global trade. But the question that remains unanswered is whether this approach has the ability to tackle this issue abundantly.

The study seems to overlook the point that governments do not create NTBs in isolation. Most NTBs are a result of some strong lobbying by impacted sectors. Just as some sectors manage to protect themselves from tariff liberalisation in free trade negotiations, some sectors manage to get NTBs created to protect their home turf. While some NTBs are justifiable to protect employment or a fledgling sector many may not fall under this criteria.

Therefore, a “participatory approach” to removing NTBs can only be the first step towards addressing the issue of NTBs as this approach can probably help identify real NTBs. What, however, may have a deeper impact is a “collaborative approach”.

A collaborative approach can be of two types. First, the private sector can collaborate in sectors where synergies can be built across the region. These sectors need to look at creating value chains that provide a win-win for all countries in the region. Creating such value chains across the region can lead to a negligible demand for NTBs since all companies involved in the value chain would like to keep the region NTB-free for that sector. Second at the government level there could be greater collaboration to sensitise companies and governments on rules and regulations where there is no harmonisation across sectors in each other’s countries. Both government and private sector can participate in such sensitisation programmes so that there is a clear understanding on market access issues.

Industry and other stakeholders also need to understand that NTBs cannot be removed altogether. What can be perhaps achieved is a greater degree of understanding on the barriers to trade. The notification of sanitary and phytosanitary measures (SPS) and technical barriers to trade (TBT) by the members of the World Trade Organisation (WTO) on a regular basis is one such example. The WTO model of notifying other members of proposed SPS and TBT measures provides a platform for discussion and debate on any new regulation that member countries propose. Regional trading agreements should look at adopting such a model for all NTBs so that there is greater transparency.

NTBs cannot be wished away. What is needed is greater transparency in their adoption and discipline in creating them.

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