Non-tariff barriers or NTBs are the most difficult hurdles to leap over and get rid of when talking about free trade. Recently there have been claims that the region is still beset by a host of NTBs.
For the East African Community (EAC) countries bent on deeper economic integration, NTBs will always be the spanner in the works. Regional policymakers must handle the issue squarely head on and with complete transparency and honesty. The downside is NTBs inspire suspicion and bad feeling which probably no one wants to have in the EAC and cause consumer prices to remain relatively high.
In very simple terms, NTBs are not import duties, but any number of procedures or standards requirements intended to frustrate the importer. This is not to say that standards are irrelevant. They certainly are. Only that it is quesitonable to use standards and other procedures as tools to kill off competition.
One of the main challenges facing the regulation of non-tariff measures is where to draw the line between protectionist and non-protectionist non-tariff measures.
Non-tariff barriers also include a wide variety of operating practices ranging from bureaucratic delays in processing request for permits, political squabbles, ‘buy national’ campaigns, infrastructure headaches and unethical business practices.
Governments will often justify NTBs on the basis of proctecting ‘national interests’. There is the need to protect infant (domestic) industries and the environment. It is just as important to protect human health and safety. These are classified as TBTs and SPSs. The jargon can get tiresome, but its important to understand it.
Technical Barriers to Trade (TBTs) covers all kinds of technical regulations like weight, colour, texture and so on. Sanitary and Phytosanitary (SPS) measures revolve around ensuring the product is safe for public consumption.
Not long ago, research by the United Nations Conference on Trade and Development (UNCTAD) found that about half of the non-tariff measures considered to be burdensome by firms in the 11 developing and least developed countries were related to TBT/SPS measures. Business surveys also show that, for exporters, more than 70% of burdensome non-tariff measures raise a procedural obstacles.
As competition in the region, intensifies, companies are bound to attempt request their relevant national governments to help them by putting up some NTBs. No one will admit it of course, but these things do happen in the corridors of power. Non-tariff measures can be used by political interests to protect domestic producers.
NTBs, and in particular technical barriers to trade and sanitary and phytosanitary measures, are often the first and best instruments to achieve public policy objectives.
A report by the World Trade Organisation (WTO) reveals how the fragmentation of supply chains and growing attention by consumers to quality and safety of food products have contributed to an increase in both governmental and private measures related to food safety and quality.
The trade and welfare effects of quality measures such as technical barriers to trade and sanitary and phytosanitary measures depend on whether they address genuine market failures. If a measure is applied only to protect domestic producers, both trade and welfare in the importing country decrease. If, however, the measure corrects a market failure, welfare is likely to increase with ambiguous effects on trade.
NTBs increase fixed costs and therefore deter market entry. Standards must also be regionally based and not selectively national.
But however attractive NTBs may look in the short term, for a future prosperous East Africa, we are inviting trouble.
Source: East African Business Week
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.