Understanding non-tariff measures
Non-tariff measures (NTMs) are policy measures other than ordinary custom tariffs that have the potential to affect the international trade in goods. The effect of NTMs on trade may either be the primary goal of the policy (for example quotas and prohibition), or only the by-product of another policy objective (for example quality control and packaging requirement).
According to WTO agreements, the use of NTMs is allowed under certain circumstances. Examples of this include the Technical Barriers to Trade (TBT) Agreement or the Sanitary and Phytosanitary Measures (SPS) Agreement, both negotiated during the Uruguay Round. These agreements are meant to allow governments to pursue legitimate policy goals even if this can lead to increased trade costs. However, NTMs are sometimes used as a mean to circumvent free-trade rules and favour domestic industries at the expense of foreign competition. In this case they are called non-tariff barriers (NTBs). It is very difficult, and sometimes impossible, to distinguish legitimate NTMs from protectionist NTMs, especially as the same measure may be used for several reasons.
Impact of non-tariff measures
Non-tariff measures classification (2012)
IMPACT OF NON-TARIFF MEASURES
For many years, a high tariff rate was one of the main barriers to international trade. However, in recent years tariff rates applied by countries around the world have fallen to historic low levels thanks to the growing number of multilateral, regional and bilateral trade agreements. In most cases, goods being trade are not subject to custom tariffs but are likely required to comply with various regulations before they are allowed to enter the destination market. Examples of such regulations include licenses or permits to import, quality requirements, inspections and price controls.
| National regulations are now more important and are often being used by governments as trade-policy instruments. To make matters more complex, NTMs are very heterogeneous as different products are subject to different kinds of regulations with varying impact and can often change quickly. NTMs can therefore contribute significantly to overall trade restrictiveness. |
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Unlike tariff where the magnitude of the measure is straightforward (for example ad valorem duties) or can be easily calculated ( for example ad valorem equivalence [AVE] of specific duties), the impact of NTMs is not immediately observable. Their impact differs across countries and sectors, and does not always necessarily imply a decrease in trade.
Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) regulations, for example, have ambiguous effects on trade. On the one hand, compliance with these regulations can lead to higher costs and prevent market access for exporters. On the other hand, they can raise consumer confidence in the quality of imports, thus increasing demand.
Developing countries are affected the most by the negative effect of NTMs, not only because regulations are too strict or too difficult to comply with, but also because of the lack of infrastructure necessary to assess whether a product confirms with the given regulation. In order to mitigate the potential negative impact of NTMs on trade, it is crucial to increase transparency of NTMs and improve accessibility of information for exporters.
Non-tariff measures classification (2012)
Given the varying nature and complexity of NTMs, it is necessary to have a common, global NTM classification system. A classification system is necessary to:
- Properly document the regulations companies have to comply with
- Harmonize these measures across different sectors and countries so they can be compared
- Enable statistical analysis on the NTMs across sectors and countries.
To facilitate the collection and dissemination of information on NTMs applied by individual countries, a system of NTM classification was prepared by a group of technical experts from eight international organizations –FAO, IMF, ITC, OECD, UNCTAD, UNIDO, the World Bank and the WTO in 2008, with subsequent revisions in 2009 and 2012. This classification first categorizes NTMs into two broad categories, technical and non-technical measures, which is followed by 16 chapters.
- Technical measures (Chapters A and B) refer to product-specific properties such as characteristics, technical specifications and production process of a product. It also includes conformity assessment methods, which affirm the compliance of a product to a given requirement. These technical regulations are generally aimed at ensuring quality and food safety, environmental protection and national security, and at protecting animal and plant health.
- Non-technical measures (Chapters C to O) do not refer to product-specific properties but to trade requirements, such as shipping requirements, custom formalities, trade rules, taxation policies, etc.
Furthermore, the classification distinguishes between import-related measures (Chapters A to O) when measures are imposed by the importing country, and export-related measures (Chapter P), when they are imposed by the exporting country itself.
In addition, procedural obstacles (PO) may make it difficult for businesses to comply with a given regulation. POs are practical challenges in administration or transportation such as long delays in testing or certification, inappropriate facilities, and lack of adequate information, etc.