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….

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. 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.

Meeting of COE & SMC was held at Dhaka in April Focus on NTBs. A sub group on NTBs/PTBs formed to identify, review and recommend steps for their removal through both bilateral & regional consultations. Follow-up pursuant to Article 7.4

Indian perspectives on NTBs Dr. Manmohan Singh, Honble Prime Minister of India in his address at 13 th 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, Honble 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….

Mr Jairam Ramesh, Honble 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. Indian perspectives on NTBs

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 Lack of facilitation of trade is costing over 15% of the value of goods to traders in South Asia Lack of Physical Infrastructure – Constraints and Irritants Contd….

Others Customs Procedure - Detailed Goods Examination/ No Computerized Processing Lack of Reliable Banking Network- no action on LCs dishonored Cumbersome procedure for travel and business visas Barriers to Intra SAARC investments Lack of Physical Infrastructure – Constraints and Irritants

Private Sectors 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….

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. Extent of NTBs in Intra SAFTA Trade

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

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