1. 1 WORKSHOP ON WTO-RELATED ISSUES NON TARIFF BARRIERS IN NORTH SOUTH TRADE- SRI LANKA’S COUNTRY PERSPECTIVE By Premathilake Jayakody Assistant Director of Commerce Department of Commerce Sri Lanka 02 nd May 2006

2. 2 Defining Non Tariff Barriers Non-Tariff measures include all measures, other than tariffs, the effect of which is to restrict imports, or to significantly distort trade.

3. 3 However although such measures restrict trade, some of them have good intentions. However although such measures restrict trade, some of them have good intentions. E.g. Health, safety, environment. Many TBT and SPS measures do fall under this category. Many TBT and SPS measures do fall under this category.

4. 4 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. 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. 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. However, the way they are applied may in practice result in the creation of barriers to trade.

5. 5 Why Countries Apply NTBs (con’d) In the Tokyo Round, a number of Agreements were adopted that lay down principles, guidelines and rules which countries must follow in adopting rules in particular areas. Most of these Agreements have been further improved and strengthened in the Uruguay Round of Trade Negotiations. The Agreements in brief are: Agreement on Customs Valuation Agreement on Customs Valuation Agreement on Import Licensing Procedures Agreement on Import Licensing Procedures Understanding on Balance of Payment Measures Understanding on Balance of Payment Measures Agreement on Technical Barriers to trade Agreement on Technical Barriers to trade Agreement on Safeguards Agreement on Safeguards Agreement on Subsidies and Countervailing Measures Agreement on Subsidies and Countervailing Measures

6. 6 Most Common NTBs Used by Various Countries Sanitary and Phytosanitory Measures (SPS) Sanitary and Phytosanitory Measures (SPS) Technical Regulations (TBT) Technical Regulations (TBT) Import Licensing Import Licensing Export Price Restraints Export Price Restraints Variable Charges Variable Charges Safeguards Safeguards Anti-dumping and Countervailing Actions Anti-dumping and Countervailing Actions Charges on Imported Goods Charges on Imported Goods Customs Procedures Customs Procedures Minimum Import Price Minimum Import Price Market Labeling Practice Market Labeling Practice Port Restrictions Port Restrictions Quantitative / Marketing Restrictions Quantitative / Marketing Restrictions Rules of Origin Rules of Origin Preferential Access Preferential Access Packaging Requirements Packaging Requirements

7. 7 NTBs Severely Affecting Exports of Developing Countries Technical Barriers to Trade (TBT) Technical Barriers to Trade (TBT) Agreement on Sanitary and Phytosanitory Measures (SPS) Agreement on Sanitary and Phytosanitory Measures (SPS) Safeguards Anti-dumping and Countervailing Actions Safeguards Anti-dumping and Countervailing Actions Customs Procedures Customs Procedures Port Restrictions Port Restrictions Quantitative / Marketing Restrictions Quantitative / Marketing Restrictions Rules of Origin Rules of Origin Preferential Access Preferential Access Packaging Requirements Packaging Requirements

8. 8 Global Trends in NTBs Affecting Developing Countries (with reference to a Study done for the OECD Trade Policy Working Paper by Barbara Fliess and Iza Lejarraga) (con’d) 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. 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. Developing countries have to spur new competitive advantages and investment in technological capability if they are to overcome this problem effectively. Developing 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. This scenario is less likely to materialize in developing countries, given the significant technological and financial constraints they face.

9. 9 Global Trends in NTBs Affecting Developing Countries (with reference to a Study done for the OECD Trade Policy Working Paper by Barbara Fliess and Iza Lejarraga) (con’d) OTHER MEASURES: Many studies have shown a growing concern about measures in developed – country markets that may have trade – restrictive effects. Many studies have shown a growing concern about measures in developed – country markets that may have trade – restrictive effects. At issue are rules and regulations associated with environment, national security, labor and other social standards. At issue are rules and regulations associated with environment, national security, labor and other social standards. While the above measures are legitimate areas for regulation, bioterrorism rules, child labor clauses, and environment standards are at times perceived as being more trade restrictive than necessary to achieve intended goals. While the above measures are legitimate areas for regulation, bioterrorism rules, child labor clauses, and environment standards are at times perceived as being more trade restrictive than necessary to achieve intended goals.

10. 10 Global Trends in NTBs Affecting Developing Countries (with reference to a Study done for the OECD Trade Policy Working Paper by Barbara Fliess and Iza Lejarraga) (con’d) Globally, the existing body of literature conveys a few key findings and trends pertaining to developing countries. Most analysts observe that the utilization of certain types of NTBs affecting these countries, such as quantitative restrictions, have markedly decreased in the post-Uruguay Round setting Globally, the existing body of literature conveys a few key findings and trends pertaining to developing countries. Most analysts observe that the utilization of certain types of NTBs affecting these countries, such as quantitative restrictions, have markedly decreased in the post-Uruguay Round setting The remaining post-Uruguay NTBs, according to the frequency ratio analysis conducted by Michalopoulos (1999) and others, appear to be more prevalent in developing than in developed-country markets, although they have decreased over time. The remaining post-Uruguay NTBs, according to the frequency ratio analysis conducted by Michalopoulos (1999) and others, appear to be more prevalent in developing than in developed-country markets, although they have decreased over time. Michalopulos (1999) notes that frequency ratios of quantity and price control measures tend to be higher in countries with lower levels of per capita income and lower degrees of openness. Michalopulos (1999) notes that frequency ratios of quantity and price control measures tend to be higher in countries with lower levels of per capita income and lower degrees of openness.

11. 11 The Measures that are in place in Sri Lanka- Import Sector The MeasureReasons for applicationRelevant WTO Provisions Remarks Import prohibitions, which apply to a range of goods, They are maintained for health, safety, security, environment, and moral reasons Article XX of the GATT Article XXI of the GATT Annex - XII Import prohibitions Import Licensing Regime They are introduced on considerations of national security, health, environment, public moral Article XX of the GATT Article XXI of the GATT At present there are 546 items at 6-digit level items remain under licence. Standards and Technical Regulations For the certification of products and systems for health and safety reasons Article XX of the GATT The Food Act No.26 of 1980 Sri Lanka Standards Institution Plant and Animal Quarantine This is to ensure that exotic diseases are not introduced through the importation of livestock and livestock products Article XX of the GATT The Plant Protection Act No.35 of 1999 The Animal Diseases Act No.59 of 1992

12. 12 The Measures that are in place in Sri Lanka- Export Sector Tariffs and Levies; Export duties were withdrawn by 1992, except for few items levied for non-economic reasons. Fiscal levies (Cess) and Royalty fees are levied on exports. The Customs Department collects the levies and royalty on certain items on behalf of other institutions. Export duties were withdrawn by 1992, except for few items levied for non-economic reasons. Fiscal levies (Cess) and Royalty fees are levied on exports. The Customs Department collects the levies and royalty on certain items on behalf of other institutions. The product categories that are subjected to Cess and Royalties. Coconut ProductsQuartz Conch shellsRaw Hides Natural rubberCashew nuts Non-ferrous scrap Metal Chanks Iron or non-alloy steel productsElephants Tea

13. 13 Case Studies in Sri Lanka

14. 14 Export of aquaculture products to the EU Fisheries products to the EU were governed by regulations on import of animal products destined for human consumption Fisheries products to the EU were governed by regulations on import of animal products destined for human consumption These regulations required overall that there be a monitoring system in place to ensure that such products do not contain excessive levels of residues of pesticides and veterinary medicinal substances These regulations required overall that there be a monitoring system in place to ensure that such products do not contain excessive levels of residues of pesticides and veterinary medicinal substances

15. 15 Aquaculture exports (con’d) Sri Lanka was required to establish such a system from the beginning including: Sri Lanka was required to establish such a system from the beginning including: Appointing the Fisheries Department as the Competent Authority Appointing the Fisheries Department as the Competent Authority Identifying and obtaining accreditation for testing laboratories Identifying and obtaining accreditation for testing laboratories Drafting and passing relevant regulations on quality of aquaculture products Drafting and passing relevant regulations on quality of aquaculture products

16. 16 Aquaculture exports (con’d) System took several years to establish but Sri Lanka is currently recognized as a third country permitted to export aquaculture products to the EU System took several years to establish but Sri Lanka is currently recognized as a third country permitted to export aquaculture products to the EU However, problems exist such as cost of testing However, problems exist such as cost of testing

17. 17 Export of bees’ honey Sri Lanka has a potential for export of bees’ honey Sri Lanka has a potential for export of bees’ honey However, bees’ honey falls under the same regulations as aquaculture products However, bees’ honey falls under the same regulations as aquaculture products There is no monitoring system meeting the stringent requirements of the EU There is no monitoring system meeting the stringent requirements of the EU There is no flexibility, despite the fact production of bees’ honey is generally organic and will not use pesticides or medicinal substances There is no flexibility, despite the fact production of bees’ honey is generally organic and will not use pesticides or medicinal substances This is a fledgling industry which could be helped by expanding into markets such as the EU This is a fledgling industry which could be helped by expanding into markets such as the EU

18. 18 Export of bees’ honey (con’d) However, there is a problem of time in establishing this monitoring system and submission of the monitoring plan However, there is a problem of time in establishing this monitoring system and submission of the monitoring plan In addition, it is very costly to do the kind of testing required to satisfy EU requirements In addition, it is very costly to do the kind of testing required to satisfy EU requirements In addition, some testing facilities may not be present In addition, some testing facilities may not be present

19. 19 Ban on Genetically Modified Foods Sri Lanka also faced problems with regards to imposing its own SPS measures in respect of GMFs Sri Lanka also faced problems with regards to imposing its own SPS measures in respect of GMFs Initially, Sri Lanka imposed regulations Initially, Sri Lanka imposed regulations Banning the import of GMFs and Banning the import of GMFs and Banning the import of certain food types such as soya and tomatoes without a certification they were GM free Banning the import of certain food types such as soya and tomatoes without a certification they were GM free However, pressure from large exporters from Northern countries led to Sri Lanka suspending these regulations indefinitely However, pressure from large exporters from Northern countries led to Sri Lanka suspending these regulations indefinitely

20. 20 General Problems Sri Lanka is facing or could face Lack of technical capacity to ensure product standards are in conformity with technically advanced standards, particularly those of developed countries Lack of technical capacity to ensure product standards are in conformity with technically advanced standards, particularly those of developed countries Lack of financial capacity Lack of financial capacity To implement production methods To implement production methods To establish comprehensive testing facilities To establish comprehensive testing facilities

21. 21 General Problems Sri Lanka is facing or could face (con’d) Need for specialized technical experts to defend Sri Lanka’s interests e.g. legal experts in trade remedies Need for specialized technical experts to defend Sri Lanka’s interests e.g. legal experts in trade remedies Need for extensive networking and cooperation between a wide cross-section of government institutions and private sector companies/ individuals to ensure Sri Lanka’s interests are protected Need for extensive networking and cooperation between a wide cross-section of government institutions and private sector companies/ individuals to ensure Sri Lanka’s interests are protected

22. 22 SAARC Common Position on NTBs at WTO Ministerial Conferences “Reject the new forces of protectionism that are disguised as concerns about the environment, social conditions, labor standard, and all other forms of non-tariff barriers”. These are not trade related issues and should be kept out of the multi – lateral trading system. “Reject the new forces of protectionism that are disguised as concerns about the environment, social conditions, labor standard, and all other forms of non-tariff barriers”. These are not trade related issues and should be kept out of the multi – lateral trading system. “The Uruguay Round negotiations did not result in greater market access for the exports of developing and least developed countries as was expected, due to the existence of ‘tariff peaks”, the phenomenon of tariff escalation, and the use of NTBs in respect of products of export interest to the developing and least developed countries. Action should be taken to ensure effective market access for the exports of these countries” “The Uruguay Round negotiations did not result in greater market access for the exports of developing and least developed countries as was expected, due to the existence of ‘tariff peaks”, the phenomenon of tariff escalation, and the use of NTBs in respect of products of export interest to the developing and least developed countries. Action should be taken to ensure effective market access for the exports of these countries” Least Developed countries should be granted duty-free access on an autonomous basis for their exports by the developed countries. These should be exempt from antidumping duties, safeguard action and NTBs. Least Developed countries should be granted duty-free access on an autonomous basis for their exports by the developed countries. These should be exempt from antidumping duties, safeguard action and NTBs.

23. 23 THANK YOU !