Tariff liberalisation, most trade negotiators will agree, is no longer a difficult area for trade negotiations. The increasing number of free and preferential trade agreements has ensured that bargaining in tariff negotiations is limited to select list of products which are sensitive to the economy.
The biggest barrier to global trade that needs immediate attention, however, is the issue of non-tariff barriers (NTBs). There is very little to show in terms of progress in addressing NTBs in international trade. Interestingly, the issue of slashing tariffs and non-tariff barriers under the WTO negotiations is discussed by the same committee on NAMA (Non-Agricultural Market Access) which is chaired by Ambassador Luzius Walecha of Switzerland.
The negotiations at the WTO for identifying a mechanism to deal with NTBs are woefully slow and incomplete and the free trade agreements do not pay anything more than lip service to this important aspect for global trade liberalisation. India has been at the receiving end of many such non-tariff barriers in several sectors, especially the food sector. From arbitrary maximum residue levels of pesticides on products like rice and grapes to confiscation of drugs at airports in the guise of IPR protection, the list of NTBs faced by Indian exporters has been long in the last 12 months.
Importantly, NTBs are not region- or country-specific, and nearly all countries have their own set of NTBs to protect domestic industry and trade. They cut across developed and developing economies while the impact on the developing economies is far more severe when faced with an NTB in an important market in a developed country since most developing countries concentrate on just a few markets for exports.
It is not just the NTBs developed by governments that impede trade but several private standards emerging in global markets are also aimed at helping a particular country or producer over another. While governments have to provide scientific backing to create non-tariff barriers, though they are in many cases arbitrary, in case of private standards even the pressure of building scientific reasoning to introduce a standard is not needed.
The need to address these issues was identified in the Doha Round and the negotiators at Geneva have been attempting to find a way forward on this issue though they have been moving very slowly on the negotiations. In the last few weeks, there has been an attempt to find a horizontal mechanism by four countries — Colombia, Hong Kong, Singapore and Thailand — that call themselves the “middle grounders” to find a horizontal mechanism that will help countries resolve the issue of NTB without going for the time-consuming dispute settlement mechanism at the WTO.
This proposal will now need to be studied in detail by countries before it can move forward. However, it is an important step forward as there is a need for a critical mass of proposals on the table to ensure that this critical area of trade liberalisation moves ahead. There have been a few more areas discussed under the issue of NTBs at the WTO.
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The first is the issue of international standards and harmonisation of standards across countries based on global standards so that there is transparency for companies on standards that would be used in countries. However, this may not be fully possible as members are at differing levels of development and it would be difficult to expect that standards across all countries will remain the same.
Various factors would have to be taken into account for developing countries, for instance, before adopting standards. This would include issues such as the cost of adopting a standard, the environment for setting a standard, etc. However, what would be important is to ensure that there is transparency by the standard-setting agencies across the globe when standards are at variance with the internationally accepted norms.
Given this backdrop, it is important that industry in India takes a lead in ensuring that NTBs become an important component of discussions at both WTO and for the FTAs. First, there is a need for a comprehensive document that lists out the various NTBs that sectors face across the globe. This document will have to spell out in numbers the loss of business because of an NTB or lack of transparency in setting standards by countries. Such exercise would goad negotiators to move ahead in the area of discussing ways and means of tackling NTBs. Without a comprehensive document that is constantly updated, it would be difficult to achieve the objective of targeting NTBs.
Second, there has to be a global dialogue among industry to identify issues such as private standards which are hurting trade. Open trade would benefit all countries and it is important that NTBs do not replace tariffs as impediments to global trade.
The author is principal adviser at APJ-SLG Law offices