At MC11, new report reveals that trade regulations are more costly for developing countries than tariffs

11 December 2017

Joint UNCTAD-World Bank Group findings confirm that non-tariff measures (NTMs) affect 77% of world trade and are more important than tariffs in trade policy.

A new report by UNCTAD and the World Bank Group being launched at the WTO's Eleventh Ministerial Conference in Buenos Aires, Argentina, on 11 December reveals that non-tariff measures (NTMs) make trade costlier for developing countries than tariffs.

NTMs are policy measures other than ordinary customs tariffs that can have a potential economic effect on international trade in goods by changing quantities traded or prices or both.

Examples might include safety regulations for machinery or toys, health regulations for food or medicines, quotas, price controls, and export restrictions.

The report is based on the updated database TRAINS 2.0, which collects comprehensive and comparable NTM data for 109 countries, covering 90% of global trade.

On usage of NTMs, the report found that:

  • NTMs affect 77% of global trade

  • In general, developed countries regulate more products and a higher share of imports than least-developed and developing countries

  • Agricultural products are more often regulated than manufactured goods and natural resources

  • Technical barriers to trade (TBT) and Sanitary and phytosanitary (SPS) measures are the most frequently used form of NTMs

  • Developed countries drive the high global usage of TBTs and export measures, while the use of SPS measures is more uniformly distributed

The report also measures the impact of NTMs on trade by estimating their ad valorem equivalents (AVEs), which express the impact of NTMs in terms of a tariff with the same effect.

Four findings stand out:

  • NTMs are more important than tariffs in almost all sectors, but especially in agriculture where, on average, NTMs have an effect equivalent to 21% of tariffs

  • NTMs are associated with a 3 percentage-point higher cost for low income countries

  • Technical measures, such as SPS measures TBTs, matter more in high-income countries than in middle-income countries

  • Traditional trade policy measures, such as quotas and price measures, constitute a higher barrier to trade in low-income countries than in middle and high-income countries

The findings will help policymakers in developing countries determine how best to design policy schemes that enhance their integration into the global economy.

Non-tariff measures matter, on average, more than tariffs
Tariffs and AVEs of NTMs, by economic sector