Non-Tariff Barriers (NTBs) in SAFTA by Manish Mohan Deputy Director - FICCI.

Non-Tariff Barriers (NTBs) in SAFTA

by Manish Mohan

Deputy Director - FICCI

Defining Non-Tariff Barriers

• Non-Tariff Measures include all measures, other than tariffs, the effect of which is to restrict imports, protect domestic industry or to significantly distort trade.

• However although such measures restrict trade, some of them have good intentions. Eg. Health, safety, environment

• Many TBT and SPS measures do fall under this category.

Most Common NTBs used by various Countries

•Sanitary and Phytosanitory Measures (SPS)

•Technical Regulations (TBT)

•Import Licensing

•Export Price Restraints

•Variable Charges

•Safeguards

•Anti-dumping and Countervailing Actions

•Charges on Imported Goods

Contd….

Most Common NTBs used by various Countries

• Customs Procedures

• Minimum Import Price

• Market Labeling Practice

• Port Restrictions

• Quantitative/Marketing Restrictions

• Rules of Origin

• Preferential Access

• Packaging Requirements

Why Countries Apply NTBs ?

• Most of the non-tariff measures are the result of

the rules and regulations, which countries apply at

the border to imported products and to the sale of

such products in the domestic markets.

• Non-tariff measures are considered necessary for

the attainment of national policy objectives.

• However, the way they are applied may in practice

result in the creation of barriers to trade

NTBs Severely Affecting Exports of SAARC Countries

• Technical Barriers to Trade (TBT)

• Agreement on Sanitary and Phytosanitory

Measures (SPS)

• Safeguards Anti-dumping and Countervailing

Actions

Contd….

NTBs Severely Affecting Exports of SAARC Countries

• Customs Procedures

• Port Restrictions

• Rules of Origin (ROO)

• Preferential Access

• Packaging/labeling Requirements

Technical Barriers to Trade (TBT)

• It has been found that technical barriers to trade are

severe obstacles to exports to developed countries whose

technical regulations, standards and conformity

assessment procedures may effectively serve as border-

protection instruments.

• SAARC countries have to spur new competitive advantages and investment in technological capability if they are to overcome this problem effectively.

• This scenario is less likely to materialize in developing

countries, given the significant technological and

financial constraints they face.

NTBs and SAFTA

Objectives & Principles of SAFTA

Article 3(2)(d)

• SAFTA shall involve the free movement of goods, between countries through, inter alia, the elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods, and any other equivalent measures;

Components of SAFTA

Article 6

• SAFTA may, inter-alia, consist of arrangements

relating to:

• Tariffs;

• Para-tariffs;

• Non-tariff measures

• Direct trade measures

Trade Liberalisation ProgrammeArticle 7.4

• The Contracting States shall notify the SAARC Secretariat all non-tariff and para-tariff measures to their trade on an annual basis.

• The notified measures shall be reviewed by the Committee of Experts, established under Article 10, in its regular meetings to examine their compatibility with relevant WTO provisions.

• The Committee of Experts shall recommend the elimination or implementation of the measure in the least trade restrictive manner in order to facilitate intra-SAARC trade.

Contd….

Article 7.5

• Contracting Parties shall eliminate all quantitative

restrictions, except otherwise permitted under

GATT 1994, in respect of products included in the

Trade Liberalisation Programme.

Trade Liberalisation Programme

Evaluation

• Provisions on NTBs/PTBs weak

• QR elimination is on but no time limit

• ASEAN (FTA) agreement has binding requirement to

eliminate QRs on the products on which concessions

are received & eliminate other NTBs within 5 years of

receiving concessions.

• Database on NTB/PTB weak. So notification system

will also be less effective.

• Meeting of COE & SMC was held at Dhaka in

April 2006.

• Focus on NTBs. A sub group on NTBs/PTBs

formed to identify, review and recommend steps

for their removal through both bilateral &

regional consultations.

Follow-up pursuant to Article 7.4

Indian perspectives on NTBs• Dr. Manmohan Singh, Hon’ble Prime Minister of India

in his address at 13th SAARC Summit in Dhaka, said, “if

SAARC as a region is to recapture its role as a

crossroads of culture and commerce, it is necessary for

us to remove the barriers to the free flow of goods, of

peoples and ideas within our own region.”

• Mr. Kamal Nath, Hon’ble Union Commerce & Industry

Minister of India in a meeting with Bangladesh in

March, 2006 said “NTBs are there not by design but by

default”.

Contd….

• Mr Jairam Ramesh, Hon’ble Minister of State for

Commerce and Industry of India said in Dhaka

“We are committed to removing the NTBs over a

period of time. The NTBs will be identified, they will

be removed.”

• FICCI has sought details on NTBs from member

Chambers of SAARC which we shall take up with

our Government for removal.

Indian perspectives on NTBs

•Infrastructure

Intra Regional Connectivity- land locked countries, comprehensive motor vehicular agreement for seamless movement across border

Poor quality of Communication Network

Airlines Connectivity, Frequency and Cost

Intra Regional Rail and Energy Grid

•Lack of facilitation of trade is costing over 15% of the value of goods to traders in South Asia

Lack of Physical Infrastructure – Constraints and Irritants

Contd….

•Others

Customs Procedure - Detailed Goods Examination/ No Computerized Processing

Lack of Reliable Banking Network- no action on LC’s dishonored

Cumbersome procedure for travel and business visas

Barriers to Intra SAARC investments

Lack of Physical Infrastructure – Constraints and Irritants

Private Sector’s Suggestion on Border Improvement

•Allow transit facilities to third countries

•Harmonize tariff and Customs documents

•Allow pre-filing of documents

•Introduce electronic data interchange

•Upgrade warehousing facilities

•Align Customs working hours

•Establish joint Customs stations

Extent of NTBs in Intra SAFTA Trade

• Hard data on NTBs for this trade segment are scarce.

• Intra-SAARC agriculture trade is large and growing. NTBs mostly are pervasive here all over the world. These are also very difficult to identify and remove.

• Trade/industry has an important role to play in identifying non-transparent measures, all of which may not necessarily turn to out to be barriers.

Contd….

• Importance of NTBs will be more pronounced once the tariff liberalisation takes place.

• Cost of compliance associated with NTBs will also become more pronounced.

• If we do not tackle this aspect of NTBs, there is a potential danger that unofficial trade remain unofficial and benefits of SAFTA are not reaped.

• Tariff reduction will not be enough of an incentive.

Extent of NTBs in Intra SAFTA Trade

Way Forward• Mutual recognition of

– Standards

– Certification

• Use the national chambers of commerce and industry in SAARC Region for NTB inventory.

• Analyze TRAINS (Trade Analysis and Information System) Data and evaluate the extent of barriers at academic level

• Prioritize the NTBs for elimination

• SAFTA agreement may consider to spell out a different article, the coverage of NTBs, their phased reductions in terms of time frame and extent.

Contd….

Way Forward

• True benefits will accrue only if “FT” in SAFTA stands for

Free TradeFast TradeFair Trade

Thank you