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 new report by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and UN Conference on Trade and Development (UNCTAD).
Launched last October 14, the Asia-Pacific Trade and Investment Report 2019 (APTIR) finds that NTMs are now affecting around 58% of trade in Asia and the Pacific.
Among 28 Asia-Pacific economies, the Philippines is the seventh country in the region with the most NTMs, with China having the most, followed by New Zealand, South Korea, Australia, Thailand, and Japan.
The report noted that one reason for the rise of NTMs is their growing popularity as a trade weapon in regional and global trade tensions. NTMs can include government procurement limitations, subsidies to export and import restrictions as well as import and export bans through unilateral or multilateral sanctions. Meeting these complex and often opaque rules can require significant resources, affecting small and medium enterprises (SMEs) in particular.
Among the surveyed Asia-Pacific economies, an average of 56% of all interviewed companies (comprising both exporters and importers) reported facing burdensome NTMs, applied either by export partners or domestically by their home state.
The Philippines has a score of 74%. Other countries with above-average scores were Bangladesh (91%), Kyrgyzstan (57%), and Cambodia (69%).
“While at the outset Filipino exporters generally feel that all barriers are de facto non-negotiable, when prompted on costs, paperwork requirements and time frames, the exporters concede that some regulations are, in fact, burdensome,” the report said.
The report noted though that NTMs as policy instruments can often be legitimate. They serve important purposes such as protection of human health or the environment and even boosting of trade under certain conditions.
Most of the NTMs are technical regulations, such as sanitary and phytosanitary (SPS) requirements on food. The average cost of these measures alone amounts to 1.6% of gross domestic product, roughly US$1.4 trillion globally.
By sector, agricultural products are generally more heavily regulated than other sectors. In the Asia-Pacific region, the highest prevalence scores—or the number of distinct NTMs applied to regulated products—on agricultural products are in China, and the Philippines and Australia, while the lowest score is in Nepal with only one measure imposed, on average.
“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,” UN undersecretary-general and executive secretary of ESCAP Armida Alisjahbana said.
“To address trade costs while maintaining the benefits of NTMs, countries need to further enhance cooperation at all levels. Regional initiatives should be actively pursued, such as NTM harmonization and mutual recognition initiatives in regional trade agreements,” UNCTAD secretary-general Mukhisa Kituyi said.
While costly to traders, failure to have essential technical NTMs in place or their poor implementation may have serious detrimental impacts on sustainable development, the report noted. The report referred to the lack of NTMs covering illegal fishing and timber trade in many Asia-Pacific economies as an example.
It also pointed to the high economic costs for the region of the African swine fever (ASF) epidemic, which can be linked to deficient implementation of NTMs. The Philippines this year has already reported cases of ASF in several provinces.
But at the same time, the report said new regulations on trade in plastic waste arising from amendment to the Basel Convention are promising.
The report noted that NTMs are often very different between countries, making it difficult for firms to move goods from one country to another.
“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,” it stated.
Looking ahead, the report highlighted that trade costs of NTMs could be significantly reduced by moving to paperless trade and cross-border electronic exchange of information. This could lower costs by 25% on average in the region, generating savings for both governments and traders of over $600 billion annually.
The Asia-Pacific Trade and Investment Report is published annually and provides analyses of regional trends and policy developments in trade in goods and commercial services, as well as foreign direct investment. It also provides insights into the impacts of these recent and emerging developments on countries’ abilities to meet the challenges of achieving sustainable development. – Roumina Pablo
