Impact of Non-tariff measures and trade regulations on Global Trade

11 September 2017

Ahead of two meetings on advancing on Non-Tariff Measures and Voluntary Sustainability Standards, Mr. Alan Winters, Professor of Economics at the University of Sussex shared his perspectives with UNCTAD

Non-Tariff measures and regulatory policies are at the center of Global Trade. The real untapped potential for further trade growth lies in regulations.

Some 96% of world trade is affected by at least one regulation, often referred to as a "non-tariff measure" (NTM).

Meeting these formidable, complex and often opaque rules requires financial and technical resources, which means that the smallest and most vulnerable companies and countries pay the heftiest price.

Mr. Alan Winters, Professor of Economics at the University of Sussex shared his perspectives with UNCTAD

Q:  How important is transparency in trade regulations?

A:  Transparency is critical. As analysts, we like to know what is going on so that we can try to pin down the effects of different policies and regimes, but the real reason for transparency is so that business people can assess clearly what their opportunities are. An unforeseen blockage to trade can lead to delay and even the loss of a transaction.

That is tough, but the bigger danger is that, because they cannot be sure that no such blockages will arise, business people just skip some opportunities altogether. This chilling effect can be much larger than the direct effect.

Alan Winters
Alan Winters
Professor of Economics at the University of Sussex
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Q:  As a member of the Group of Eminent Persons on Non-Tariff Barriers and founder of the modern understanding of Non-Tariff Measures, do you think there has been progress in terms of classification, data collection, research, UNCTAD NTM programme?

A:  There has been progress - good progress, in fact - but the 'to do' list is still long. The agreement of a common classification has been a big step forward because it offers leverage to everyone's collection efforts. Basing collection on official sources is clearly necessary, but in an ideal world we would also collect data from partner and business reports.

These may lead to official documents that would otherwise have been overlooked, but they may also uncover measures that affect behaviour because of the way they are interpreted on the ground or promulgated to the public. Unofficial data are much more sensitive to collect than official ones but they may still matter. Thus while the official data are the core, there are other things that we and businesses would like to catalogue.

Q:  What do you think are important next steps?

A:  Time series data are a key requirement for me. Then, I think, ensuring that we are interpreting data as they affect behaviour rather than just as the law says. Indices are useful. However, each index is geared to a particular job and so according to the question asked one requires a different index.

Maybe the requirement is to write software that allows users to interrogate data effectively so that they can easily extract and summarise the data necessary for their particular question.

Q:  Traders and consumers often pay the price for divergence of regulations. What do you think about the importance of regulatory convergence and cooperation between countries?

A:  I am a fan of regulatory convergence and cooperation between countries - unlike some of my countrymen! However, it is a difficult and sensitive task and clearly some regulations will always need to vary across countries for technical, political or historical reasons.

The key is to respect these critical differences while trying to minimise the effect of the others. Sometimes harmonisation is possible, but as we discovered in Europe over the 1980s-2000s, it is usually very fraught.

Hence the better way is often to pursue mutual recognition of standards and compliance testing so that regulatory regimes become partial substitutes for one another.