Least developed countries lose 10 percent of exports on non-tariff measures

20 July 2016

Least developed countries lose an estimated $23 billion per year, equal to about 10 per cent of their exports to the Group of 20 (G20) through failure to comply with G20 non-tariff measures, according to new data published by UNCTAD on Tuesday.

Non-tariff measures cover a broad range of legitimate and important policy instruments, including measures to protect the health of a country’s citizens and its environments, too. For example, non-tariff measures may limit the use of pesticides in food.

But as tariffs have fallen to historic lows, non-tariff measures have replaced them as a key brake on faster global trade growth. And the expansion of the middle classes in many countries is expected to increase demand for safer, cleaner products. This, in turn, may require Governments to introduce more non-tariff measures.

“These kinds of measures are becoming increasingly widespread,” said UNCTAD Deputy Secretary-General Joakim Reiter. “For example, measures on the cleanliness and pathogen-free status of food – known as sanitary and phytosanitary measures – cover more than 60 per cent of agricultural trade.”

“Such regulatory measures disproportionately increase trade costs for small and medium-sized enterprises and developing countries, particularly the least developed. We estimate, for example, that the impact of the European Union’s sanitary and phytosanitary measures comes to a loss of about $3 billion for low-income country exports. That’s equal to 14 per cent of their agricultural trade with the European Union.”

But, Mr. Reiter added: “We certainly don’t expect G20 countries to drop all their non-tariff measures, which serve important policy objectives such as health and safety, but we do need to manage this issue better.”

“Non-tariff measures are the new frontier in our quest for greater global trade,” he said, noting that better information would reduce the costs of non-tariff measures. “It’s all about transparency and harmonizing regulations.”

Aiming to enhance transparency on non-tariff measures , UNCTAD also launched on Tuesday a database to list the non-tariff measures of 56 countries, covering 80 per cent of world trade. The database allows policymakers to search by country and product to find out quickly the relevant non-tariff requirements.

“This database will improve countries’ ability to understand the regulatory requirements, helping them to comply more easily and at less cost,” said Guillermo Valles, Director of the Division on International Trade in Goods and Services, and Commodities.

Policymakers can use the database, for example, to harmonize their regulations and accelerate the growth of regional trade.

The African Union has already requested that UNCTAD support them with the Continental Free Trade Area by setting up a similar database. This database will provide the necessary information on non-tariff measures so that negotiators can harmonize their regulations, cutting the costs of trade.

Low-income countries tend to be disproportionately affected by non-tariff measures. Their companies are smaller and so the non-tariff measures, which have fixed costs, become disproportionately more expensive.

Non-tariff measures have a valuable contribution to make in achieving the Sustainable Development Goals, by protecting health and the environment.

“The use of non-tariff measures in the world will increase but this should be done in a smart way, for example by using international standards to a maximum extent,” said Ralf Peters, Chief ad interim of the Trade Analysis Branch. “Use non-tariff measures to protect your citizens, but don’t let them compromise trade because that will block economic growth and job creation.”