BUSINESS PERSPECTIVES ON NON-TARIFF MEASURES

BUSINESS PERSPECTIVES ON NON-TARIFF MEASURES

FINDINGS AND IMPLICATIONS FOR ARAB STATES

Mathieu Loridan, ITCUN-ESCWA EGM on Trade and Transport Facilitation, Dubai10 April 2013

Removing trade obstacles among LAS countries can lead to substantially increased trade and job creation

Increased total exports from Arab states by 10% and more than double intra Arab trade by 2025.

More than 2 million new jobs created in the LAS’ export sectors by 2025 (growth highest in Somalia/Sudan and Oman). Main beneficiary sectors are food, metals and machinery and electronics sectors:

2 million new jobs represents an increase of 10% of the workforce in exporting sectors…

…and covers 5-10 % of the new jobs needed to absorb the increase of the workforce (as estimated by World Bank and FEMISE)

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Source: ITC technical document on LAS trade integration, 2012

1. Short introduction to non-tariff measures

(NTMs)

2. The ITC programme on NTMs

3. Survey findings in the region

4. Conclusions and way forward

NTMs – What are they?• Official policy measures on exports and imports,

other than ordinary customs tariffs, than can potentially have an effect on international trade in goods, changing traded quantities, prices or both;

• Mandatory requirements, rules or regulations legally set by the government of the exporting, importing or transit country (in contrast to private standards which are not legally set);

• Can affect negatively both exports and imports and become non-tariff barriers to trade

4

NTM classification on goods

A Sanitary and phytosanitary measuresB Technical barriers to trade

C Pre-shipment inspection and other formalities D Contingent trade protective measuresE Non-automatic licensing, quotas, prohibitions and quantity control

measuresF Price control measures including additional taxes and chargesG Finance measuresH Measures affecting competitionI Trade-related investment measuresJ Distribution restrictionsK Restriction on post-sales servicesL Subsidies (excluding export subsidies)M Government procurement restrictions*N Intellectual property*O Rules of origin

P Export related measures

Technical Measures

Non-Technical Measures

Impo

rt re

late

d m

easu

res

Export related measures

5

1. Short introduction to non-tariff measures (NTMs)




Global objective:

Key stakeholders in beneficiary countries are aware of non-tariff obstacles to trade that affect their products and are enabled to formulate options to address these obstacles.

Key activities (Mar 2010 - Mar 2013):

1) Collection, classification and dissemination of NTM regulations; in collaboration with UNCTAD and World Bank ( integration of data into MAcMap)

2) Comprehensive business surveys on NTMs in 23 countries

Mainly funded by UK DFID

The ITC programme on NTMs7

Why do we need the business perspective? NTMs and other trade barriers

NTMsRegulations on trade and products, other than tariffs, which may negatively affect the international trade of goods.

8

Excessively strict NTMsE.g.: pesticides levels set by the EU on imported tomatoes are hard to comply with for Moroccan exporting companies

Procedural obstacles (POs) E.g.: the analysis required by the EU to test the level of pesticides of imported tomatoes from Morocco is delayed because the laboratory in charge of the analysis (in Morocco or in partner country) is overstrained.

Business environment: obstacles that are not related to NTMs but hinder international trade. E.g.: lack of port infrastructure.

Trade barriers

Global methodology

…based on large-scale company level surveys

…representative by sector and company size

…adjusted to country-specific requirements

• Identify trade impediments faced by companies on product and partner country level.

• Enable companies to voice their concerns and needs regarding the identified problems and create dialogue among national stakeholders.

• Reinforce country capacity: survey and analysis implemented in collaboration with local specialists, after intensive training.

ITC business surveys on NTMs

9

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The survey process consists of two steps:

NTM Surveys follow a two-step approach:

Step 1. Phone-screen interviews (5-10 min) Step 1 is aimed to identify the companies which are affected by

burdensome NTMs or other obstacles to trade.Results of the phone screen interviews show the share of companies

affected by NTM-related barriers to trade.

Step 2. In-depth face-to-face interviews (~60 min)Step 2 face-to-face interviews cover only companies that reported on the phone that their export is affected by barriers to trade. Face-to-face interviews capture detailed information on the types of

burdensome NTMs and other obstacles to trade at the product level and by partner country.

As of 1 January 20139,339 phone interviews3,290 face-to-face interviews(plus 7 pilot countries)

In the region- Egypt - Morocco- Occ. Palestinian T. - Tunisia

ITC business surveys on NTMs - countries11





13

Context: low intra-regional trade

LDCs

RoW

LAS

DCs

OECD

0% 10% 20% 30% 40% 50% 60%

1%

8%

11%

31%

49%

LAS trade partners (excl. oil)

ITC calculations based Cepii’s BACI database, 2010

Context (cont’d): Multiplication of trade Agreements involving LAS members

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Business perspectives on NTMs across surveyed regions

15

South America & Caribbeans

Arab region

Average

Asia

East Africa

West Africa

0% 10% 20% 30% 40% 50% 60% 70% 80%

43%

51%

56%

59%

64%

74%

Share of companies facing burdensome NTMs and other obstacles to trade

ITC calculations based on Survey findings in 21 countries

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Guinea

Tunisia

Rwanda

Kenya

Cote d'Ivo

ire

Sri La

nka

Malawi

Cambodia

Seneg

al

Paragu

ay

Burkina F

aso

Occ. Pale

stinian

Terri.

..

Averag

e

Uruguay

Madag

ascar

Morocco

Mauriti

usPeru

Egyp

t

Jamaic

a

Trinidad

and To

bago

Kazakh

stan

0%10%20%30%40%50%60%70%80%90%

100% 95%

80%75% 74% 72% 70% 69% 69%

63% 62% 60%56% 56% 54% 53%

43% 41% 40% 38%35% 34% 34%

Share of companies facing burdensome NTMs and other obstacles to trade

ITC calculations based on Survey findings in 21 countries

Business perspectives on NTMs across surveyed countries

LAS EU 27 Non-LAS (RoW)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

64%

78%

66%

35% 37%30%

Agriculture

Companies facing obstacles when exporting to this destination, %Companies facing obstacles applied by this destination, %

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What are the most affected export sector and destination for Arab states?

ITC calculations based on Survey findings for Egypt, Morocco, Occupied Palestinian Territory and Tunisia.

LAS EU 27 Non-LAS (RoW)

56% 56% 58%

36%

17%

33%

Manufacturing

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30%

31%

19%

20%

Agriculture

38%

17%

26%

19%

Manufacturing

LASEURoWHome

Who applies the burdensome NTMs?


LAS EU RoW0%

20%

40%

60%

80%

100%

46%23%

44%

54%77%

56%

Agriculture

Non-technical NTMs Technical NTMs (SPS/TBT)

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What type of NTMs apply partner countries?


LAS EU RoW

66%47%

79%

34%53%

21%

Manufacturing

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What are the NTMs affecting agricultural exports?


17%

37%

0%

11%

9%

5%

20%

LAS

30%

39%

10%

2% 6%

2% 9%

2%Non-LAS

Technical requirements

Conformity assessment

Pre-shipment inspection and other entry formalities

Charges, taxes and other para-tariff measures

Quantity control measures

Finance Measures

Rules of origin and related certificate of origin

Other import related measures

Technical NTMs

Non-technical NTMs

Agriculture

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What are the technical measures affecting agricultural exports?


1%

14% 5%

12%

5%

25%

33%

5%

LAS

22%

5%

9%

8%29%

21%

6%

Non-LAS

Tolerance limits for residues and substances restriction

Labelling, marking, packaging

Import prohibition or restrictions of products or substances

Other technical requirements

Product registration

Testing

Product certification

Other conformity assessment

Agriculture

7%

27%

30%3%1%1%

27%

4%

Non-LASTechnical requirements

Conformity assessment

Pre-shipment inspection and other entry formalities

Charges, taxes and other para-tariff measures

Quantity control measures

Finance Measures

Rules of origin and related certificate of origin

Other import related measures

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What are the NTMs affecting manufacturing exports?


Technical NTMs

Non-technical NTMs

Manufacturing

8%

26%

8%11%

1%

12%

33%

2%LAS

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What are the technical measuresaffecting manufacturing exports?


Manufacturing

1%

11%

13%

9%

12%43%

12%

LAS1%

19%

30%14%

19%

17%

Non-LAS Tolerance limits for residues and substances restriction

Labelling, marking, packaging

Import prohibition or restrictions of products or substances

Other technical requirements

Product registration

Testing

Product certification

Other conformity assessment

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Why partner’s NTMs are burdensome?


LAS EU RoW0%

10%20%30%40%50%60%70%80%90%

100%

32%47% 39%

34%

33%32%

34%19%

29%

Technical NTMs (SPS/TBT)

Too Strict Both Procedural Obstacles

LAS EU RoW

35%51%

32%

25%8%

32%

39% 41% 36%

Non-technical NTMs

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Where do procedural obstacles take place?


67%

33%

Agriculture

In home country

51%49%

Manufacturing

In partner country

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What are the main procedural obstacles?


Other

Information/transparency issues

Lack of recognition/ accreditations

Discriminating behavior of officials

Lack of sector-specific facilities

Administrative burdens related to regulations

Informal or unusually high payment

Time constraints

0% 10% 20% 30% 40% 50%

Agriculture

In home country In partner country

0% 10% 20% 30% 40% 50%

Manufacturing





Conclusions Regional integration requires efforts beyond the removal of

‘conventional’ tariffs: o Non-tariff obstacles significantly hamper intra-LAS trade:

especially in manufacturing especially due to technical requirements (SPS and TBT)

Good and bad news: many issues, in particular procedural obstacles, can and need to be addressed at home, e.g. w.r.t. implementation of existing rules, efficiency of institutions, lack of information, etc.

The simple existence of an FTA does not remove NTM-related problems necessity to fully implement provisions related to elimination of non-tariff obstacles within agreements

Foster public-private dialogue with the goal of removing burdensome obstacles to trade, thereby assisting companies become more competitive

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Selected ex. from OPT: Trade facilitation – home-made problems

…but so is getting to the border in the first place.

Crossing the border is complicated…

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Selected ex. from Morocco: survey recommendations:

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NTM surveys – next steps

• Increase country coverage: 20+ surveys to be conducted in 2013-2016 among which new LAS countries (Aid for Trade in Arab states program)

• Follow-up activities in Arab countries (Egypt, Morocco, Occ. Palestinian T., Tunisia)

• Publications: Country reports and other publications (e.g. LAS regional integration)

• NTM in services (2013-2016): development of a methodology and pilot surveys

More information on www.intracen.org/NTM

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http://www.intracen.org/publications

Comments or questions?

You can contact me also at

[email protected]

International Trade Centre (ITC)Palais des Nations

CH-1211 Geneva 10, Switzerland

Thank you!

mailto:[email protected]

BACK UP

What is ITC?

MissionITC’s overarching goal is to help developing countries achieve sustainable development through exports. In particular it helps SMEs better integrate in the global trading system and reap the benefits of trade - to increase sales, export performance and hence revenues and to contribute to creating jobs and reducing poverty.

UNCTAD: United Nations Conference on Trade and Development (formulation of trade policies for economic development through trade and investment)

World Trade Organisation: Forum of multilateral trade negotiations,

implementation of agreements and managing trade conflicts

ITC enables small business export success in developing countries by providing trade development solutions to the private sector, trade support institutions and policy makers

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ITC is contributing to regional integration and competitiveness enhancement in the Arab Region:

ITC assists SME exporters to integrate into regional value chains, for example in Tunisia where a company adapted its products to integrate into the luxury accessories value chain in Morocco to export to a global market

ITC provides support on the supply side to improve product design, quality and packaging of exported products, for example it has helped a Jordanian company export high-end home goods to Arab countries and Europe hence creating jobs for women

ITC has been supporting a variety of Trade Support Institutions such as chambers of commerce in Tunisia, sectoral associations for leather in Morocco and the handicraft association in Jordan to provide improved business support services

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Technical measures – What are they?• Comprise technical requirements and conformity assessment

• Technical requirements:o refer to product-specific propertieso define product characteristics, technical specifications of a product or the

production process and post-production treatmento often has a legitimate purpose (e.g. protect the consumer from health or

safety risks)o include sanitary and phytosanitary measures which are generally

implemented to protect human, animal and plant life and health from pests and diseases.

• Conformity assessments:o determining whether a product or a process complies with a technical

requiremento refer to control, inspection and approval procedures - such as testing,

inspection, certification and traceabilityo confirm and control that a product fulfills the technical requirements and

mandatory standards

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NTMs – Why are they important?• Tariff rates have fallen to historic low levels

• National regulations are more important and used more often by governments as trade policy instruments

• Products need to comply with wide range of NTMs; NTMs often vary across products and countries and can change quickly

• Nature of NTMs has changed over time – they have become less visible and direct, but rather more complex

• Impediments companies face in relation to NTMs and their compliance are often linked to lack of capabilities, infrastructure and efficient procedures (“procedural obstacles”) in the country

• No transparency on and easy access to relevant information about NTMs that are applied by the destination market

• Policy makers often lack a clear understanding about the current obstacles to trade their private sector is facing – making it difficult to define policies and strategies overcoming these challenges

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Context 1: Intra-regional trade shares around the world (excl. oil)

SADC

LAS

ALADI

ASEAN

EU

0% 10% 20% 30% 40% 50% 60% 70%

10%

11%

17%

23%

60%

Removing trade obstacles among LAS countries can lead to substantially increased trade and job creation

Increased total exports from Arab states by 10% and more than double intra Arab trade by 2025.

More than 2 million new jobs created in the LAS’ export sectors by 2025 (growth highest in Somalia/Sudan and Oman). Main beneficiary sectors are food, metals and machinery and electronics sectors:

2 million new jobs represents an increase of 10% of the workforce in exporting sectors…

…and covers 5-10 % of the new jobs needed to absorb the increase of the workforce (as estimated by World Bank and FEMISE)

Expansion of the current industrial exports will primarily benefit male unskilled and semi-skilled labour.

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Who is affected? (1/2)

Simple cross-country average based on 11 countries

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Why are NTMs perceived as burdensome?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

23.5%

76.5%NTM with PONTM only

*

*Procedural Obstacles

Most NTMs are reported as being burdensome due to Procedural Obstacles (POs) like administrative delays or lack of appropriate facilities.

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Most reported types of SPS / TBT measures (import-related measures, Chapters A+B)

37.3% Product certification8.7% Testing7.9% Inspection requirement

6.0% Labelling (e.g. product labels with information for consumers)

4.4% Fumigation 4.1% Origin of materials and parts

3.6% Tolerance limits for residues of or contamination by certain substances

3.5% Product characteristics, including quality or performance requirements

2.9% Product registration2.6% Packaging

2.5%

Authorization requirement because of: national security; protection of human health or safety; environmental protection; or prevention of deceptive practices

2.5% Restricted or prohibited use of certain substances in food and feed

14.0% Other

Which NTMs are perceived as burdensome? (2/2)

Simple cross-country average based on 11 countries

Does the partner country matter?

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Developed countries

Developing countries

0%10%20%30%40%50%60%70%80%90%

100%

74.4%49.4%

25.6%50.6%

Other (C-O)TBT/SPS (A+B)

Burdensome NTMs applied by partner countries: developing vs developed

Simple cross-country average based on data from 11 reporting countries



3. Survey results (general)

4. Survey results (Arab States)

5. What to do?

6. Conclusions

Aggregate survey results for Arab countries (1/4)

a/ Agriculture: simple average across Egypt, Morocco and Tunisia; Manufacturing: simple average across Egypt and Morocco

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22%

40%

15%

24%

Agriculture

29%

22%15%

33%

Manufacturing

LAS

EU 27

Non-LAS (ROW)

Home

Figure: Share of NTM cases by sector and country applying the NTM – simple average a/


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LAS EU 27 Non-LAS (ROW)

LAS EU 27 Non-LAS (ROW)

Agriculture Manufacturing

0%

10%

20%

30%

40%

50%

60%

70%Average share of NTM cases Average share of exports

Fig. B: Share of burdensome NTMs and exports across trading partners

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17%

37%9%

11%

8%

18%

LAS countries

42%

40%

2%5%

2% 3% 6%

Non-LAS countriesA. Technical regulations

B. Conformity assessment

D. Charges, taxes and other para-tariff measures

E. Quantity control measures

F. Finance Measures

O. Rules of origin

Other

Figure: Agricultural exports: types of burdensome NTMs applied by partner countries

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A. Technical regulations

B. Conformity assessment

C. Pre-shipment inspection and other formalities

D. Charges, taxes and other para-tariff measures

E. Quantity control measures

F. Finance Measures

H. Anti-competitive measures

O. Rules of origin

G. Price control measures

N. Intellectual property

16.2%

22.7%

4.7%6.5%0.9%10.7%

0.4%

37.3%

0.2% 0.5%LAS countries

Figure: Manufacturing exports: types of burdensome NTMs applied by partner countries

Talking about ROOs….: Trade Agreements involving LAS members

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Examples of problems reported (intra-regional trade): ROOs (1/2)“…In many cases even with this preferential COO the company pays tariffs in most of the Arab countries.”

“Although the products imported from Morocco are complying with the PAFTA rules of origin, the Customs Authority do not grant it the preferential treatment and they refuse the PAFTA certificate of origin. Their excuse is that the producing company is a French subsidiary functioning in Morocco.”

“All entries required in the PAFTA certificate of origin must be written 100% in Arabic otherwise the certificate is refused. This is very difficult as some … technical specifications can't be translated in Arabic.”

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Examples of problems reported (intra-regional trade): ROOs (2/2)“According to the Pan Arab Free Trade Area (PAFTA), the customs authority ask for a mark of origin to be printed on the product itself in a way that can't be removed or erased. This can't be done in this company's case due to the nature of the products, which are big rolls of coil nets. The supplier was instructed to print those marks on a metal piece to be attached to the product but the Customs Authorities refused and the company had to pay tariffs.”

“Issuing the certificate of origin (EUR 1) takes 5 days which delays the shipping process.” (case reported for exporting to the EU)

“According to the context of PAFTA agreement, originating products shouldn't consist of any Israeli component. The Customs Authorities in some importing countries require the presentation of many documents and declarations to prove that this requirement is fulfilled. A certificate from the shipping line is required stating that the ship didn't pass through any Israeli port, which is really unnecessary. The other documents are hard to get.”

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Examples of problems reported (intra-regional trade): Technical measures“The Saudi authorities prohibits the use of genetically modified organisms (GMOs)- The product should be GMOs free. The Egyptian Ministry of Health is not able to test the products and issue the relevant certificate because of the lack of the appropriate facilities or equipped labs to do such analysis.”

“The Lebanese Authorities changed the labelling requirements where each furniture piece should have a "Made in Egypt" stamp on it. There was no due notice for this modified requirement, that caused problems for the company when shipping a non-complying shipment thus a fine of USD 5000 had to be paid.”

“The partner country often changes the required labelling requirements without due notice.”

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Examples of problems reported (intra-regional trade): Conformity assessment“The Saudi Customs Authorities require a comformity certificate for the product according to the European Standards (EN 817). This certificate is only accepted from a private third company called "InterTech" located in Alexandria. The cost of this certificate is very high (30,000 EGP) per shipment according to Intertech. The Customs Authorities refused to recognize or accept a similar certificate from the Egyptian Standardization Organization or the Faculty of Engineering.”

“The Jordanian Customs requires the products to be tested against their standards where a sample is taken in Jordan and tested once it reaches the port. The testing process takes time and usually delayed for at least 2 weeks. Also they accepted no equivalent Egyptian certificate…” (Chemicals)

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Examples of problems reported (intra-regional trade): import authorizations

“Yearly import authorization is required to import polyurethane sheets, that is based on a test conducted by the Department of Chemistry. Receiving the authorization is usually delayed. It is difficult and time-wasting to undertake the same process on a yearly basis especially when the company imports the same product from the same producer with a quality certificate.”

“After complying with the strict technical specifications requirement, the company should receive an import authorization which is delayed for more than 5 months and it's not granted yet.” (case of export to Tunisia)

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Examples of problems reported (intra-regional trade)

“Despite having the PAFTA agreement with many Arab Countries, some of those countries ask for legalizing all export documents from their embassies against fees which delays the process & incurs high fees.”

“The authorities in the partner country [Arab States] require product registration; however, despite registration the customs officials stop the goods claiming that they don't satisfy the national standards. The authorities are not transparent about their standards and those standards are never published. As a consequence, the importer has to pay bribes”

“Importers of medicines are required to be registered by the ministry of health. In order to register, the company is required to comply with so many documents. The problem is the lack of a clear system leads to a huge delays, not all the required documents are asked at one time.s to clear the goods.”

Stylized facts from ITC NTM surveys

• Burdensome NTMs vary significantly depending on the company size, the sector affiliation and partner countries where products are exported

• RTA membership does not insulate from NTM-related problems

• A lot of problems are “home-made”, even if the NTM itself is applied by the partner country

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Documents

BUSINESS PERSPECTIVES ON NON-TARIFF MEASURES