On the heterogeneous effects of non-tariff measures: Panel evidence from Peruvian firms
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UNCTAD Research Paper No. 4

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With steadily diminishing tariffs, the focus of trade policy makers and analysts is logically turning towards Non-Tariff Measures (NTMs). Indeed, NTMs and in particular technical measures have become a prominent feature in the regulation of international trade in goods. While technical regulations were imposed on almost 37 per cent of tariff lines in 1999, the equivalent figure for 2015 is more than 60 per cent (UNCTAD, 2015).

The major aim of this paper is to assess how different types of NTMs would affect firms' exports allowing for heterogeneous effects along the firm size dimension. The Peruvian experience within the LAIA (Latin American Integration Association) country group is of particular relevance. Descriptive statistics reveal that the share of Peruvian exports directed to LAIA countries has been increasing since 2000. During the same period, the number of exporting firms to that region has been decreasing. A possible explanation could be an intensification of the implementation of NTMs and in particular of technical regulations.

This conjecture appears to be validated by empirical results. The latter suggest that firms of size above the median of exporting firms' size distribution have gained from the implementation of new measures (or the amendment of existing ones). This is true for all margins of trade considered in the paper. Their export values increase, the probability of export increases and the probability to leave the exports sector falls. These results are robust to changes in sampling and identification strategies.

From the exporting country point of view, the costs of exporting for its firms are directly impacted by the implementation of a technical regulation by a trade partner country. Trade costs are likely to have a fixed and a variable component. The latter could be either ad valorem or additive such as specific tariffs. Proportionally, changes in fixed and additive variable costs affect smaller firms more. Clearly any policy able to reduce the effects of changes in costs to export on small (and medium) firms may dampen the exclusion effect of technical regulations identified previously.

Several dimensions should be considered in implementing policies aimed at reducing the cost of compliance with NTMs and in particular technical regulations in specific international markets. The first dimension is the domestic business and production environment of small and medium enterprises. The second dimension is the customs procedural framework. The third dimension is the intergovernmental political platform.

Within the first dimension, policy could be designed on several complementary grounds. First, access to crucial information concerning export requirements for any specific product should be facilitated for all type of producers, with particular attention paid to smaller ones. Moreover, advisory services related to the implementation, production-wise, of any specific requirements should be made available. Facilitating access to finance is an additional necessary accompanying measure to be considered by policy makers. In addition to technical assistance and capacity building programs, private sector based initiatives should also be considered to promote the participation of small and medium enterprises in export markets.

Within the second dimension, the customs procedural framework, desirable policy actions have been identified extensively in the literature and several already put into practice. The most prominent is the Single Window for Foreign Trade, which aims to reduce the number of agencies at the border. This should reduce fixed business costs and therefore help SMEs expand their cross-border trade. Several countries have set up such single windows. Peru established a Single Window for Foreign Trade (VUCE) in 2010.

The third dimension relates to actions a government would be able to actively pursue beyond domestic borders. As technical regulations have primarily non-trade objectives, it would be misleading to look at technical regulations as we look at tariffs. Streamlining NTMs would consist of reform and harmonization, so as to maintain their objectives but at the lowest possible costs.

In practice, streamlining NTMs will reduce costs and increase the competitiveness of firms engaged in international trade. Governments should ensure that NTM requirements are scientifically based.

In addition governments should agree on the conditions for the mutual recognition of certificates delivered by their respective conformity assessment bodies. Without such certificates and their recognition by competent authorities in destinations markets firms would not be able to conclude any transaction.


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