Non-Tariff Trade Regulations on the Rise in Asia-Pacific
While applied tariffs in the Asia-Pacific region have halved over the past two decades, the number of non-tariff measures (NTMs) - policy regulations other than tariffs affecting international trade - has risen significantly, according to a report launched on October 14 UNCTAD.
The Asia-Pacific Trade and Investment Report 2019 finds that NTMs are now affecting around 58 percent of trade in Asia and the Pacific. One reason for the rise of NTMs is their growing popularity as weapons of trade policy in regional and global trade tensions. This can include government procurement limitations, subsidies to export and import restrictions and import and export bans through unilateral or multilateral sanctions. Meeting these complex and often opaque rules can require significant resources, affecting in particular SMEs.
However, the report also notes that NTMs as policy instruments can often be legitimate. Most of the NTMs are technical regulations, such as sanitary and phytosanitary requirements on food. The average cost of these measures alone amounts to 1.6 percent of gross domestic product, roughly $1.4 trillion globally, but they also serve important purposes such as protection of human health or the environment.
While costly to traders, failure to have essential technical NTMs in place or their poor implementation may have serious detrimental impacts on sustainable development. For example, the report refers to the lack of NTMs covering illegal fishing and timber trade in many Asia-Pacific economies. It also points to the high economic costs for the region associated with the African swine fever epidemic, which can be linked to deficient implementation of NTMs. At the same time, new regulations on trade in plastic waste arising from amendment to the Basel Convention are promising.
On average, each imported product in Asia and the Pacific faces 2.5 NTMs, and 57 percent of imports are affected by at least one NTM. NTMs are often very different between countries, making it difficult for firms to move goods from one country to another. A synthesis of country-level private sector survey studies reveals that, on average, 56 percent of all interviewed firms reported encountering problems related to NTMs when engaging in international trade. Most significantly, it was reported that domestic procedural obstacles - rather than the required standards embedded in NTMs - are the primary reason why foreign and domestic NTMs are perceived to be burdensome. The obstacles include time constraints, informal or unusually high payments, lack of transparency, discriminatory behavior of government officials and a lack of appropriate testing facilities.
Looking ahead, the report also highlights that trade costs of NTMs can be significantly reduced by moving to paperless trade and cross-border electronic exchange of information. This could lower costs by 25 percent on average in the region, generating savings for both governments and traders of over $600 billion annually.
The report is available here.