--By R.B. Rauniar 

 

Global experience shows that non-tariff issues are emerging as major barriers to trade in goods and services across borders. With MFN tariffs coming down, issues of NTBs are gaining importance in South Asia too along with the rest of the world. Whilst SAFTA has made some headway in moving towards duty-free access for tradable goods, NTB issues have tended to remain relatively less addressed within the context of the SAARC.

 

If regional cooperation is to be deepened through vertical integration and promoting cross border supply-chains, NTBs in South Asia will need to be addressed adequately since NTBs pose one of the major challenges for SAARC in context of strengthened regional economic and trade cooperation.

 

Definition of Non-Tariff Measure (NTM)

Policy measures other than border tariffs that affect trade in goods, services, and factors of production are referred to as Non-tariff measures (NTMs). According to the United Nations Conference on Trade and Development (UNCTAD), classification of NTBs falls into six broad categories: 

1. Specific Limitations on Trade: Import Licensing requirements, Proportion restrictions of foreign to domestic goods (local content requirements), Minimum import price limits, Embargoes 

2. Customs and Administrative Entry Procedures: Valuation systems, Anti-dumping practices, Tariff classifications, Documentation requirements, Fees

3. Standards: Standard disparities, Intergovernmental acceptances of testing methods and standards, Packaging, labeling, and marking

4. Government Participation in Trade: Government procurement policies, Export subsidies, countervailing duties, Domestic assistance programs

5. Charges on imports: Prior import deposit subsidies, Administrative fees, Special supplementary duties, Import credit discrimination, Variable levies, Border taxes

6. Others: Voluntary export restraints, Orderly marketing agreements

 

Non-Tariff Barriers in SAARC

Trade officials of South Asian nations often points out non-tariff barriers as the major obstacles in intra-regional trade. Despite tremendous trade potentials within the South Asia region, lack of trade infrastructures, complicated customs procedures and certification on quality of goods have been creating roadblocks in the process of regional trade enhancement. Some of the pertaining issues regarding NTB are lack of border infrastructure and traffic planning, problem of land ports at the border and lack of cross border transport agreements among SAARC countries. 

 

Some studies found that a 50 per cent reduction in time of export can generate benefits equivalent to 4 per cent GDP of SA- LDCs. Further, due to lack of through-transport movement, formidable transport inefficiencies exist at the interface.

 

In view of the SAFAS, there is a possibility that NTBs will also emerge with regard to services trade in future:

• Thresholds on the total value of service transactions

• Restrictions on the number of service operations

• Limits on the number of natural persons to be employed in case of supply for a particular service

• Measures which force a service supplier to supply a service through a particular set of legal means

• Limits on the percentage share of foreign investment, which may be accounted for by foreign shareholders 

 

Dispute Settlement Mechanism

The SAFTA Agreement stipulates formation of the Committee of Experts (CoE) to deal with NTB issues. The work of the CoE is carried out in the following manner:

• The Contracting States notifies the SAARC Secretariat of all non-tariff and para-tariff measures imposed on their exports on an annual basis

• The measures are then reviewed by the CoE, established under Article 10, in its regular meetings, to examine their compatibility with relevant WTO provisions

• The CoE then recommends the elimination or implementation of the measure in the least trade restrictive manner in order to facilitate intra- SAARC trade

• Member countries submit their complains in sub-group meetings on non-tariff barriers; responding countries give their responses; a majority of notifications and complaints are being dealt through bilateral negotiations.

• Whilst the SAFTA stipulates that CoE would act as the DSB for the purpose of settling NTB related disputes. In majority of the cases RTAs such as EU and NAFTA tend to follow the WTO DSM mechanism whilst ASEAN’s DSM is somewhat different.

 

Policy Recommendations

A majority of NTBs and perceived NTBs relate to SPS-TBT, and health-hygiene related standards. Many of these concern national standards. The best way to go forward would be to : 

a) Ensure that these are not country-specific but of general/common nature

b) Ascertain that whether the requirements are beyond internationally recognised standards e.g. Codex plus; 

c) Strengthen national standard setting institutions to meet compliance requirement; 

d) Strengthening of technical laboratories, standardisation, testing, quality management, certification authorities and inspection bodies, which ought to be perceived as an investment priority by the SAARC members; 

 

Mutual Recognition Agreements (MRAs)

Developing MRAs is also critically important for delivery of services particularly through Mode 4 (Movement of Natural Persons). Lack of recognition of qualifications, skills, or experience is one of the most common barriers affecting Mode 4 (Chanda 2005). 

 

Similarly, a targeted programme needs to be designed to facilitate cross-border trade through development of border infrastructure, and if required, coordination of infrastructure development at border points;

(a) harmonization of customs rules and regulations, valuations and customs procedures; 

(b) building of capacities to deal with the most prevalent SPS-TBT related NTBs at particular border points

 

Conclusion

Given the lowering of classical import barriers such as tariffs, non-tariff measures (NTMs) are becoming an increasingly important instrument governments use to safeguard domestic societal concerns. Between January 1995 and October 2011, 10,366 regular and emergency measures had been notified to the WTO. According to WTO, 2010 saw the largest number of notifications in a single year so far, at 1,436. 

 

SAARC countries should realize the need of customs reform, improvement of trade infrastructure, removal of visa barrier for business people, simplification in movement of goods as well as vehicles, and improved facilities for warehousing of trade goods to pave the way for greater trade within the region.

(Writer is Executive Committee member of SAARC Chamber of Commerce & Industry (SCCI). He can be contacted at rauniar@mos.com.np)