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Non-Tariff Measures More Costly Than Tariffs for Developing Countries, Report Says

Thursday, December 14, 2017
Sandler, Travis & Rosenberg Trade Report

A new report by the United Nations Conference on Trade and Development and the World Bank reveals that non-tariff measures make trade costlier for developing countries than tariffs. NTMs are defined as measures other than ordinary customs duties that can potentially have an economic effect on international trade; e.g., safety regulations for machinery or toys, health regulations for food or medicines, quotas, price controls, and export restrictions.

The report states that NTMs affect 77 percent of global trade and that developed countries regulate more products and a higher share of imports than least-developed and developing countries. Agricultural products are more often regulated than manufactured goods and natural resources and are also more intensively regulated; i.e., many distinct measures are applied to agri-food imports while there are fewer measures applied to manufactured products. Technical barriers to trade (used more by developed countries) and sanitary and phytosanitary measures (which are more uniformly distributed between developed and developing countries) are the most frequently used form of NTMs.

The report finds that the restrictiveness of NTMs exceeds current tariffs by far in almost all sectors. This is particularly true for agricultural products, where developing country exporters face NTMs equivalent to tariffs higher than 20 per cent, but also for wood products, machinery, and other manufactures. Technical measures (TBT/SPS measures) matter more in high-income countries than in middle-income countries but also constitute a relatively high trade barrier in low-income countries even though the number of such measures is relatively lower. In general, traditional trade policy measures such as quotas and price measures constitute a higher barrier to trade in low-income countries than in middle- and high-income countries.

According to the report, most NTMs are applied equally to domestic and foreign producers but have different effects on different countries and exporters. Low-income countries tend to be affected more than high-income countries for reasons that include costs of compliance, which are often higher for lower-income countries, and the composition of their export baskets, which tend to consist of more agricultural and apparel products.

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