APEC BUSINESS ADVISORY COUNCIL

REGIONAL ECONOMIC INTEGRATION WORKING GROUP

ABAC IV, LIMA, NOVEMBER 2016

ABAC Cross-Cutting Principles to ensure NTMs do not become NTBs

The APEC Business Advisory Council (ABAC) is an independent high-level group of business people who advise Leaders of the 21 economies of the Asia-Pacific Economic Cooperation (APEC) area on priority issues for business in the region. ABAC members, meeting in Lima in November 2016, agreed a set of cross-cutting principles that should be used in the design, implementation and assessment of non-tariff measures to ensure that they do not act as barriers to trade.

 Background: non-tariff barriers

While good progress has been made in progressively lowering tariffs in many economies, non-tariff measures are increasingly prominent.   Many non-tariff measures are in place to achieve legitimate goals, such as the protection of human, animal or plant health or safety, transparency or quality assurance, or to regulate a particular aspect of the functioning of the market.  However sometimes non-tariff measures act as non-tariff barriers (NTBs) – either because the way that they are designed or implemented is more trade-restrictive than necessary to meet a legitimate objective, because they are discriminatory, or because they are in fact designed to keep imports out of a market.

NTBs can inhibit trade by adding costs and making imports or exports more difficult. They can be magnified along global value chains and can inhibit participation in such value chains. NTBs come in many different forms and are often particular to products or markets. It is nevertheless possible to derive a set of cross-cutting principles for the design and application of non-tariff measures which would seek to minimise any barriers to trade.

 Information

• Business needs information about import and other regulations that is clear and readily available, preferably through an online portal;

 Processes

• Business needs processes for the development of non-tariff measures that are transparent and timely;
• Affected business (including small producers and MSMEs), both domestic and foreign, should be consulted in the development of standards;
• The application of non-tariff measures should be timely, predictable and coherent;

 Measures

• Measures should be transparent, coherent and non-discriminatory;
• Measures should be based on sound science (in the case of SPS measures), or closely aligned with international norms (for technical measures) such as Codex, ISO and APEC;
• Measures must not discriminate against imported goods or services;

 Underpinning philosophy

• Measures must be developed consistent with the principle of “least-trade restrictive”;
• The emphasis should be on desired or equivalent outcomes rather than prescriptive process or production methods.

ANNEX

A business perspective on non-tariff barriers: Cross-cutting principles

Non-tariff barriers: a source of frustration for business

The modern trade environment does not just involve tariffs at the border, but also increasingly entails a plethora of “non-tariff measures” (NTMs) as part of the trade policy toolkit used by economies to organise and regulate markets. Many of these measures are in place to achieve legitimate goals, such as the protection of human, animal or plant health or safety, transparency or quality assurance, or to regulate a particular aspect of the functioning of the market.

Sometimes, however, non-tariff measures can become non-tariff barriers (NTBs)[1] – either because the way they are designed or implemented is more trade-restrictive than necessary to meet a legitimate objective (whether intentionally or unintentionally), because they are discriminatory, or because they are in fact designed to keep imports out of a market.

NTBs add costs and lower competitiveness for business, raise prices for consumers, distort trade flows and inhibit investment. They can be particularly burdensome for MSMEs and can curtail the ability of all firms to participate effectively in global value chains. These impacts can occur even where cross-border activity is not the target, or where a legitimate policy objective is intended.

The number of NTBs is rising, and their cost burden is growing. It has been estimated that NTMs cost APEC economies some US$790 billion each year, around three times as much as tariffs. Over the last year, trade restrictions among G20 countries rose by an average of 21 new trade-restrictive measures per month; the WTO has likewise reported that the global stockpile of trade-restrictive measures continues to rise. (Within APEC, sanitary and phytosanitary regulations and technical measures are by far the most commonly used NTMs.) This rise in non-tariff forms of protection is particularly concerning at a time of slowing trade, with the WTO recently reporting that trade and output growth are now lower than prior to the global financial crisis.[2]

 What does a “business-friendly” NTM look like?

As economies look for ways to help trade to grow, a principled approach to non-tariff measures, which seeks to tackle the specific problems caused by NTBs across all sectors, could be helpful. The priority for business above all is for a clear, predictable trading environment that minimizes unnecessary burdens.

Cross-cutting problems and possible solutions

[1] NTBs include product standards that are not based in sound science or inconsistent with international norms; arbitrary and diverse labelling requirements; divergent or burdensome product registration and certification; food safety and quarantine-related measures that are not based in science; onerous Customs requirements; procedural obstacles such as a lack of transparency and predictability in administrative or regulatory processes, and many other measures that limit import volumes or prices or both (e.g. quotas, import licensing etc.).

[2] WTO, Report on G20 Trade measures (mid-October 2015 to mid-May 2016), 21 June 2016; and WTO, Director-General’s report on trade-related developments, 23 July 2015.  For NTM costs, see Ballingall, J. and D. Pambudi. (2016, forthcoming). ‘The economic cost of non-tariff measures in the APEC region’. NZIER Public Discussion Paper 2016/4.