ITC shines light on how non-tariff measures affect small firms
A new International Trade Centre (ITC) report shines a light for the first time at company level on the unseen barriers to trade that non-tariff measures (NTMs) pose for small businesses in developing countries.
The report – The invisible barriers to trade: How businesses experience non-tariff measures – brings the private sector’s voice to the debate on the trade impact of NTMs. Based on surveys, it documents the extent to which more than 11,500 companies in 23 developing countries have experienced NTMs as regulatory and procedural barriers to trade.
In light of the findings from these business surveys, ITC is already working with countries to address these barriers.
NTMs can range from regulations on licensing and rules of origin, to product-specific requirements such as quality or content standards, labelling, testing and certification. While often necessary to safeguard consumer safety or other public policy objectives, NTMs can also be needlessly complex and expensive to comply with. Exporters can experience them as obstacles to trade, independently of whether they are intended as such by the regulatory authorities.
After various multilateral rounds of tariff cutting, tariffs are, for all but a handful of products, no longer the main market access barrier for developing countries. Indeed, exporters from least developed countries (LDCs) often face no duties at all. But at the same time, exporters and importers are encountering ever more NTMs.
“Tariffs are the tip of the iceberg,” said ITC Executive Director Arancha González. “Non-tariff measures constitute the bulk of invisible barriers that companies face. For SMEs these barriers are harder to overcome. This report shows that many policy, regulatory and procedural barriers can be addressed at home.”
Microeconomic evidence on the role and importance of NTMs was limited. By putting together the individual experiences of developing country companies, both small and large importers and exporters, the report constitutes an unprecedented effort to collect empirical data, going well beyond the usual NTM indicators such as number of days to export or the number of documents needed.
The findings are a valuable source of information in the framework of the United Nations post-2015 development agenda, and in implementing the World Trade Organization’s (WTO) Trade Facilitation Agreement, which could reduce trade costs by up to 15% in developing countries by cutting red tape and reducing border bureaucracy.
Up to half of the firms surveyed reported being affected by NTMs, with smaller companies experiencing the greatest difficulties. Among business sectors, the agro-food sector was the one where NTMs such as sanitary and phytosanitary standards (SPS), had the greatest impact.
The evidence suggests that the trade impact of NTMs is inversely related to the development level of exporting countries, for two reasons. One, they have limited resources to assist exporters cope with NTMs imposed by potential trading partners. Two, their own domestic procedures for exporters often pose even greater obstacles to would-be exporters than the measures themselves.
For example, a Tanzanian exporter of cut roses reported that when exporting to Spain, obtaining an export permit from its own Ministry of Industry and Trade took up to three months.
Addressing obstacles raised by partner countries may be difficult and time consuming, but governments can move more quickly to tackle their own domestic measures and procedures. This is the ‘low-hanging fruit’. The survey underscored the large scope for action in tackling before-the-border problems that businesses face.
The survey results have already fed into trade strategies, for example, in Côte d’Ivoire and Malawi .
ITC NTM surveys are implemented as part of its trade-related technical assistance. They aim to facilitate identifying and removing trade obstacles through increased transparency and dialogue. Country findings are systematically discussed with local, regional and international actors. For each country, a report is published and is available online.
This report and the related 23 NTM national surveys are available at a new web page ntmsurvey.intracen.org, to be launched at the World Trade Organization’s 5th Global Review of Aid for Trade, during the ITC side event, Getting Past Non-Tariff Measures: Reducing Costs for Business.