Sunday, August 19, 2012

Non-Tariff barriers - Protectionism's new name?

The issue of the use of non-tariff measures to advance "protectionist" objectives has been a subject of debate in international economic law and policy debates. While the last few decades has seen a fall in tariffs as a means of protection to local industry, non-tariff measures (NTMs) has become the new tool to ensure both achievement of public policy objectives as well as protection. The legal framework in the WTO that addresses the NTMs are the TBT and SPS Agreement. How much domestic policy space these Agreements provide for countries to pursue their national priorities within an international system and to what extent they prevent adoption of blatantly protectionist measures would require careful analysis.

A piece by Marc Bacchetta, Cosimo Beverelli in Vox titled "Non-tariff measures and the WTO" gives an overview of the use of TBT and SPS measures in the context of international trade.Are they per se protectionist or do they serve domestic public policy purposes? The WTO itself allows the use of NTMs to achieve public policy objectives. the TBT and SPS Agreements reflection of this. however, where does one draw the line between a legitimate use of NTMs for public policy objectives and it's use for protecting local industry in a discriminatory manner? It becomes more interesting when "protecting domestic industry" from "increased competition" itself becomes the stated public policy goal of an NTM. How does the WTO deal with this and what impact does this have on international trade, the multilateral regime and trade policy?

The piece highlights the steady growth of NTMs as depicted in the graphics below which is inversely related to tariff reduction of countries.

(SPS measures)

(TBT measures)

The piece argues that NTMs need to be regulated since they have a tendency to be protectionist and have a devastating impact on trade and costs. Non- transparency of measures is also an issue.
"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. In the GATT, the approach used is to allow domestic regulatory measures provided that they do not discriminate against the imported product. One of the issues that has arisen in connection with national treatment concerns the relevance and weight to be given to the rationale or purpose of the measure. The report argues that economic theory can help identify situations in which governments may be more likely to use non-tariff measures to address competitiveness concerns rather than the stated public policy rationale. Indeed, an analysis of the efficiency and incidence of the measure in question, and of the wider sectoral and political context would help identify the purpose of non-tariff measures."
Finding the right line to tread in the "protectionist"-"public policy" debate is an extremely difficult task. Further, the perceived loss of domestic sovereignty and increased tendency to replace tariff measures with NTMs to further national development strategies will make this debate even more complex and strenuous. The use of NTMs can adversely impact both developing as well as developed countries.While in the case of developing countries, NTM increase the cost of compliance to "new standards", for the developed world access to markets is impacted by NTMs. The recent AB reports in the COOL case and Dolphin safe tuna case indicate the growing importance of these measures in international trade policy. Treading the middle path will become all the more difficult.

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