Trade costs of non-tariff measures doubles in the Asia-Pacific region

ASIA – Trade costs of non-tariff measures have now more than double that of tariffs in the Asia Pacific region, according to a new report by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

While applied tariffs in the Asia-Pacific region have halved over the past two decades, the report highlighted that number of non-tariff measures (NTMs) – policy regulations other than tariffs affecting international trade – has risen significantly.

The report ‘Asia-Pacific Trade and Investment Report 2019 (APTIR)’ which was released by ESCAP in cojunction with the UN Conference on Trade and Development (UNCTAD) finds that NTMs are now affecting around 58 per cent of trade in Asia and the Pacific.

The growing popularity of the use of non-tarriff measures as ‘weapons of trade’ policy in regional and global trade tensions has been attributed as a major cause of the uptick.

This has been affected through government procurement limitations, subsidies to export and import restrictions as well as import and export bans through unilateral or multilateral sanctions.

While the report notes that NTMs as policy instruments can often be legitimate, meeting these complex and often opaque rules can require significant resources, affecting in particular SMEs.

Most of the measures are technical regulations, such as sanitary and phytosanitary requirements on food, which also serve important purposes such as protection of human health or the environment; and can even boost trade under certain conditions.

 “While trade costs associated with NTMs are estimated to be more than double that of tariffs, NTMs often serve important public policy objectives linked to sustainable development.

“The key is to ensure they are designed and implemented effectively so that costs are minimized,” United Nations Under-Secretary-General and Executive Secretary of ESCAP, Armida Alisjahbana, said.

Effect of NTMs, thier challenges and remedies

According to the report, the average cost of these measures alone amounts to 1.6 per cent of gross domestic product, roughly US$1.4 trillion globally.

While costly to traders, the reports highlights that 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 cites high economic costs for the region associated with the African swine fever epidemic and illegal fishing, which can be linked to deficient implementation of NTMs.

“To address trade costs while maintaining the benefits of NTMs, countries need to further enhance cooperation at all levels,” UNCTAD Secretary-General Mukhisa Kituyi said.

“Regional initiatives should be actively pursued, such as NTM harmonization and mutual recognition initiatives in regional trade agreements,” Kituyi noted.

In most cases NTMs are often very different between countries, making it difficult for firms to move goods from one country to another.

The reports proposes that, regulatory cooperation at the regional and multilateral level and the use of international standards when designing or updating NTMs is therefore important in overcoming challenges related to the heterogeneity of regulations.

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 per cent on average in the region, generating savings for both governments and traders of over US$600 billion annually.

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