An Introduction to Non-Tariff Barriers and WTO Rules

An Introduction to Non-Tariff Barriers and WTO Rules

Simon Lacey | Last Updated 15 August 2013

Outline

Some definitional issues A few words on history A reminder of some core WTO principles The main rules and agreements governing NTBs Some disputes from the past, present and future A few NTBs currently affecting Indonesia Solving problems arising from NTBs

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Definitions

Non-Tariff Measures (NTMs): generally defined as measures other than tariffs, which have an effect on trade.

NTMs generally on the increase, particularly since the GFC and particularly in handful of medium to large middle-income countries

Although NTMs often pursue legitimate policy objectives, if they are overly trade restrictive, they are considered Non-Tariff Barriers (NTBs)

Non-Tariff Barriers (NTBs): defined as selected (non-tariff) measures that discriminate against foreign products, directly or indirectly, de jure or de facto, or where trade restrictiveness, whether or not deliberate, exceeds what is needed for the measure’s non-trade objectives

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Classifying NTMs

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Source: International Trade Center (ITC) http://www.intracen.org/article/Creating-clarity-out-of-complexity-Defining-obstacles-to-trade/

Historical Trends for NTBs

As tariffs were successfully negotiated downwards after 1947, the incidence of non-tariff barriers increased in both relative and absolute terms.

The accession of Japan to the GATT in 1955 which itself used a complex system of broadly entrenched and complex behind-the-border policies to control the domestic market for everything from autos to photographic film;

The inventory of NTMs developed under the GATT in the years between the end of the Kennedy Round and the start of the Tokyo Round also highlighted the importance that NTBs had assumed as tariffs had been on the decline

Adoption of a series of plurilaterial “codes” in the Tokyo Round that later became part of the Single Undertaking in the Uruguay Round that specifically addressed non-tariff barriers

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Some Core WTO Principles

Non-discrimination Transparency Predictability Proportionality (“no more burdensome than necessary”) Regulations must be necessary to achieve a legitimate

policy objective Regulations must not be applied in just a manner as to be

disguised barriers to trade or unnecessarily restrictive of trade

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WTO Rules on NTBs Specifically

GATT Article III (National Treatment) GATT Article VI and the Anti-dumping Agreement GATT Article VI and the Agreement on Subsidies and

Countervailing Measures GATT Article VII and the Customs Valuation Agreement GATT Article XI General Elimination of Quantitative

Restrictions GATT Article XII (Balance of Payments Restrictions) GATT Article XVII (State Trading Enterprises) TBT Agreement SPS Agreement WTO Agreement on Pre-shipment Inspection WTO Agreement on Rules of Origin WTO Agreement on Import Licensing Procedures

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WTO Dispute Settlement and NTBs

Because tariffs have ceased to be the main obstacle to trade, and because any controversies in terms of the legal interpretation of Members’ tariff obligations have long since been settled (in the early years of the GATT mostly), dispute settlement at the WTO (involving trade in goods) has predominantly concerned NTBs.

Some examples of major cases that concerned NTBs:• US – Gasoline (DS 2)• EC – Bananas (DS 27)• EC – Hormones (DS 26)• Japan – Film (DS 44)• US – Shrimp (DS 58)• US – Cool (DS 384,386)• US – Clove Cigarettes (DS 406)• Indonesia - Horticultural Products (DS 455)

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Some NTBs Affecting Indonesia

Palm oil exports to the US being potentially negatively impacted by pending rule-making by the EPA

This is a NTB and market access issue involving the legal interpretation of what constitutes a technical barrier to trade, as well as of various non-discrimination obligations.

The European Renewable Energy Directive

This is a NTB and market access involving the legal interpretation of WTO commitments and obligations under the GATT, and the TBT Agreement.

Plain-packaging tobacco products in Australia and New Zealand

This is potentially is a non-tariff barrier in the form of a denial of trademark protection.

Salak exports to China are being obstructed domestic regulations on permitted cadmium levels

This is a non-tariff barrier and market access issue involving the legal interpretation of the domestic regulation's compatibility with the WTO SPS Agreement

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Solving Problems with NTBs

Three ways to solve concerns arising from the

imposition of NTMs:

Raising concerns at the WTO technical committees

Enforcing rights through the WTO dispute settlement

mechanisms; and/or

Through trade negotiations.

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Solving trade concerns arising from NTMs (cont.)

WTO technical committees provide a forum for the solution of

concerns arising from the imposition of NTMs. Example: TBT

Committee and SPS Committee, for NTMs enacted as technical

regulations and SPS measures, respectively.

Some data on the issues raised before the TBT Committee as

STCs

- 365 so-called Specific Trade Concerns (STCs) were raised before the TBT Committee from 1995 to 2012. 94 were raised in 2012 alone;

- The most commonly-stated objectives of the measures under discussions are: health and safety, and environment protection;

- WTO Members maintaining most of the measures discussed at the Committee are the EU, China and the US.

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Some data on the issues raised before the SPS Committee:

344 STCs were raised in the SPS Committee meetings from 1995 to 2012. 16 were raised in 2012 alone;

The stated objectives include food safety (30%), plant health (24%), animal health and zoonoses (40%) or other issues, such as certification requirements (6%);

WTO Members raising STCs include: developing country WTO Members (89 STCs); developed country WTO Members (212 STCs); and LDC WTO Members (5 STCs); and

In many occasions, STCs are supported by more than one WTO Member. In these instances, the measure under discussion was maintained by: a developed country Member in 202 cases; developing country Member in 178 cases; and an LDC Member in 1 case

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WTO/ASEAN/bilateral dispute settlement mechanisms:

established to settle commercial disputes and seek redress of

the alleged violations of countries’ rights under

WTO/ASEAN/bilateral trade agreements.

Binding nature of the dispute settlement mechanism as a

necessary element to ensure enforceability of the rights (and

predictability of commercial concessions).

Trade negotiations: possible forum to solve trade concerns

arising from the imposition of NTMs. Examples: WTO DDA

Round; EU-Indonesia FTA.

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A key tool to monitor and assess NTMs: transparency

requirements, which include publication of the measures and

notification. WTO and ASEAN rules are clear and call for the

establishment of effective instruments to achieve transparency:

enquiry points, notification authorities, ATR, NTRs, etc.

It is critical to make use of these instruments. Coordination with

domestic businesses, traders and trade associations must be

enhanced and built into national schemes.

Dont forget the power and support that can be received from

your “allies” in the importing countries.

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Want to know more?

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An Introduction to Non-Tariff Barriers and WTO Rules

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