July 21, 2016

Developing countries lose 10% of exports on non-tariff measures – UN

Developing countries lose an estimated 23 billion U.S. dollars annually through failure to comply with Group of 20 non-tariff measures, the UN Conference on Trade and Development (UNCTAD) says.

According to new data published by UNCTAD, the loss is equal to about 10 per cent of the exports of the developing countries to the Group of 20 (G20).

The G20 is an international forum for the governments and central bank governors from 20 major economies comprising 19 countries plus the European Union.

Non-tariff measures cover a broad range of legitimate and important policy instruments, including measures to protect the health of a country’s citizens and its environments.

Non-tariff measures may limit the use of pesticides in food but as tariffs have fallen to historic lows, non-tariff measures have replaced them as a key brake on faster global trade growth.

UNCTAD Deputy Secretary-General Joakim Reiter said the expansion of the middle classes in many countries was expected to increase demand for safer and cleaner products.

Reiter said this, in turn, might require countries to introduce more non-tariff measures adding, these kinds of measures are becoming increasingly widespread.

“For example, measures on the cleanliness and pathogen-free status of food – known as sanitary and phytosanitary measures – cover more than 60 per cent of agricultural trade.

“Such regulatory measures disproportionately increase trade costs for small and medium-sized enterprises and developing countries, particularly the least developed.

“We estimate, for example, that the impact of the European Union’s sanitary and phytosanitary measures come to a loss of about three billion U.S. dollars for low-income country exports.”

The UNCTAD official said the three billion U.S. dollars loss equaled to 14 per cent of the developing countries’ agricultural trade with the European Union.
“We certainly don’t expect G20 countries to drop all their non-tariff measures, which serve important policy objectives such as health and safety, but we do need to manage this issue better.

“Non-tariff measures are the new frontier in our quest for greater global trade,” he said.

The UNCTAD noted that better information would reduce the costs of non-tariff measures adding, “It’s all about transparency and harmonising regulations”.

UNCTAD also launched a database to list the non-tariff measures of 56 countries, covering 80 per cent of world trade with the aim to enhance transparency on non-tariff measures.

The database allows policymakers to search by country and product to find out quickly the relevant non-tariff requirements.

Guillermo Valles, UNCTAD’s Director of Division on International Trade in Goods and Services, and Commodities, said the database would improve countries’ ability to understand the regulatory requirements, helping them to comply more easily and at less cost.

Valles said policymakers could use the database to harmonise their regulations and accelerate the growth of regional trade.

The African Union had already requested that UNCTAD support them with the Continental Free Trade Area by setting up a similar database.

This database will provide the necessary information on non-tariff measures so that negotiators can harmonise their regulations, cutting the costs of trade.

Low-income countries tend to be disproportionately affected by non-tariff measures.

Their companies are smaller and so the non-tariff measures, which have fixed costs and become disproportionately more expensive.

Ralf Peters, Chief ad interim of the Trade Analysis Branch, said non-tariff measures had a valuable contribution to make in achieving the Sustainable Development Goals, by protecting health and environment.

“The use of non-tariff measures in the world will increase but this should be done in a smart way, for example by using international standards to a maximum extent.

“Use non-tariff measures to protect your citizens, but don’t let them compromise trade because that will block economic growth and job creation,” he said.