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.
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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 Programme Article 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….
Trade Liberalisation Programme 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.
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.
Follow-up pursuant to Article 7.4 • 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.
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….
Indian perspectives on NTBs • 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.
Lack of Physical Infrastructure – Constraints and Irritants • Lack of facilitation of trade is costing over 15% of the value of goods to traders in South Asia • 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 Contd….
Lack of Physical Infrastructure – Constraints and Irritants • 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
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….
Extent of NTBs in Intra SAFTA Trade • 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.
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 Trade • Fast Trade • Fair Trade