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WORKSHOP ON WTO-RELATED ISSUESWORKSHOP ON WTO-RELATED ISSUES

NON TARIFF BARRIERS IN NORTH SOUTH NON TARIFF BARRIERS IN NORTH SOUTH TRADE-TRADE-

SRI LANKA’S COUNTRY PERSPECTIVESRI LANKA’S COUNTRY PERSPECTIVE

ByByPremathilake JayakodyPremathilake Jayakody

Assistant Director of CommerceAssistant Director of CommerceDepartment of CommerceDepartment of Commerce

Sri LankaSri Lanka

0202ndnd May 2006 May 2006

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Defining Non Tariff BarriersDefining Non Tariff Barriers

Non-Tariff measures include all Non-Tariff measures include all measures, other than tariffs, the effect measures, other than tariffs, the effect of which is to restrict imports, or to of which is to restrict imports, or to significantly distort trade.significantly distort trade.

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However although such measures However although such measures restrict trade, some of them have restrict trade, some of them have good intentions.good intentions.

E.g. Health, safety, environment.E.g. Health, safety, environment.

Many TBT and SPS measures do fall Many TBT and SPS measures do fall under this category.under this category.

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Why Countries Apply Why Countries Apply NTBs ?NTBs ?

Most of the non-tariff measures are the Most of the non-tariff measures are the result of result of the rules and regulationsthe rules and regulations, which countries , which countries apply at the border to imported products and to apply at the border to imported products and to the sale of such products in the domestic the sale of such products in the domestic markets.markets.

Non-tariff measures are considered Non-tariff measures are considered necessarynecessary

for the for the attainment of national policy attainment of national policy objectivesobjectives..

However, the way they are applied may in However, the way they are applied may in practice result in the creation of barriers to trade.practice result in the creation of barriers to trade.

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Why Countries Apply NTBs Why Countries Apply NTBs (con’d)(con’d)

In the In the Tokyo RoundTokyo Round, a number of , a number of Agreements were Agreements were adopted that lay down principles, guidelines and adopted that lay down principles, guidelines and rulesrules which countries must follow in adopting rules in which countries must follow in adopting rules in particular areas. Most of these Agreements have been particular areas. Most of these Agreements have been further improved and strengthened in the Uruguay Round further improved and strengthened in the Uruguay Round of Trade Negotiations.of Trade Negotiations.

The Agreements in brief are:The Agreements in brief are:

Agreement on Customs ValuationAgreement on Customs ValuationAgreement on Import Licensing ProceduresAgreement on Import Licensing ProceduresUnderstanding on Balance of Payment MeasuresUnderstanding on Balance of Payment MeasuresAgreement on Technical Barriers to tradeAgreement on Technical Barriers to tradeAgreement on SafeguardsAgreement on SafeguardsAgreement on Subsidies and Countervailing MeasuresAgreement on Subsidies and Countervailing Measures

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Most Common NTBs Used by Various Most Common NTBs Used by Various Countries Countries

Sanitary and Phytosanitory Measures (SPS)Sanitary and Phytosanitory Measures (SPS)Technical Regulations (TBT)Technical Regulations (TBT)Import LicensingImport LicensingExport Price RestraintsExport Price RestraintsVariable Charges Variable Charges Safeguards Safeguards Anti-dumping and Countervailing ActionsAnti-dumping and Countervailing ActionsCharges on Imported GoodsCharges on Imported GoodsCustoms Procedures Customs Procedures Minimum Import PriceMinimum Import PriceMarket Labeling PracticeMarket Labeling PracticePort RestrictionsPort RestrictionsQuantitative / Marketing Restrictions Quantitative / Marketing Restrictions Rules of Origin Rules of Origin Preferential AccessPreferential AccessPackaging RequirementsPackaging Requirements

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NTBs Severely Affecting Exports of NTBs Severely Affecting Exports of Developing CountriesDeveloping Countries

Technical Barriers to Trade (TBT)Technical Barriers to Trade (TBT) Agreement on Sanitary and Phytosanitory Agreement on Sanitary and Phytosanitory

Measures (SPS)Measures (SPS) Safeguards Anti-dumping and Safeguards Anti-dumping and

Countervailing ActionsCountervailing Actions Customs ProceduresCustoms Procedures Port RestrictionsPort Restrictions Quantitative / Marketing Restrictions Quantitative / Marketing Restrictions Rules of Origin Rules of Origin Preferential AccessPreferential Access Packaging RequirementsPackaging Requirements

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Global Trends in NTBs Affecting Global Trends in NTBs Affecting Developing Countries Developing Countries (with reference to a (with reference to a Study done for the OECD Trade Policy Working Study done for the OECD Trade Policy Working Paper by Barbara Fliess and Iza Lejarraga) Paper by Barbara Fliess and Iza Lejarraga)

(con’d)(con’d)TBT:TBT: It has been found that technical barriers to trade are It has been found that technical barriers to trade are

severe obstacles to exports to developed countries severe obstacles to exports to developed countries whose technical regulations, standards and conformity whose technical regulations, standards and conformity assessment procedures may effectively serve as assessment procedures may effectively serve as border-protection instruments.border-protection instruments.

Developing countries have to spur new competitive Developing countries have to spur new competitive advantages and investment in technological capability advantages and investment in technological capability if they are to overcome this problem effectively.if they are to overcome this problem effectively.

This scenario is less likely to materialize in developing This scenario is less likely to materialize in developing countries, given the significant technological and countries, given the significant technological and financial constraints they face.financial constraints they face.

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Global Trends in NTBs Affecting Global Trends in NTBs Affecting Developing Countries Developing Countries (with reference to a (with reference to a Study done for the OECD Trade Policy Working Study done for the OECD Trade Policy Working Paper by Barbara Fliess and Iza Lejarraga) Paper by Barbara Fliess and Iza Lejarraga)

(con’d)(con’d)OTHER MEASURES:OTHER MEASURES: Many studies have shown a growing concern Many studies have shown a growing concern

about measures in developed – country markets about measures in developed – country markets that may have trade – restrictive effects.that may have trade – restrictive effects.

At issue are rules and regulations associated with At issue are rules and regulations associated with environment, national security, labor and other environment, national security, labor and other social standards.social standards.

While the above measures are legitimate areas While the above measures are legitimate areas for regulation, bioterrorism rules, child labor for regulation, bioterrorism rules, child labor clauses, and environment standards are at times clauses, and environment standards are at times perceived as being more trade restrictive than perceived as being more trade restrictive than necessary to achieve intended goals . necessary to achieve intended goals .

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Global Trends in NTBs Affecting Developing Global Trends in NTBs Affecting Developing CountriesCountries (with reference to a Study done for (with reference to a Study done for the OECD Trade Policy Working Paper by Barbara the OECD Trade Policy Working Paper by Barbara

Fliess and Iza Lejarraga) Fliess and Iza Lejarraga) (con’d)(con’d) Globally, the existing body of literature conveys a few key Globally, the existing body of literature conveys a few key

findings and trends pertaining to developing countries. Most findings and trends pertaining to developing countries. Most analysts observe that the utilization of certain types of NTBs analysts observe that the utilization of certain types of NTBs affecting these countries, such as quantitative restrictions, affecting these countries, such as quantitative restrictions, have markedly decreased in the post-Uruguay Round setting have markedly decreased in the post-Uruguay Round setting

The remaining post-Uruguay NTBs, according to the The remaining post-Uruguay NTBs, according to the frequency ratio analysis conducted by Michalopoulos (1999) frequency ratio analysis conducted by Michalopoulos (1999) and others, appear to be more prevalent in developing than and others, appear to be more prevalent in developing than in developed-country markets, although they have in developed-country markets, although they have decreased over time. decreased over time.

Michalopulos (1999) notes that frequency ratios of quantity Michalopulos (1999) notes that frequency ratios of quantity and price control measures tend to be higher in countries and price control measures tend to be higher in countries with lower levels of per capita income and lower degrees of with lower levels of per capita income and lower degrees of openness. openness.

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The Measures that are in place in Sri The Measures that are in place in Sri Lanka-Import SectorLanka-Import Sector

The Measure Reasons for application Relevant WTO Provisions

Remarks

Import prohibitions, which apply to a range of goods,

They are maintained for health, safety, security, environment, and moral reasons

Article XX of the GATTArticle XXI of the GATT

Annex - XII Import prohibitions

Import Licensing Regime

They are introduced on considerations of national security, health, environment, public moral

Article XX of the GATTArticle XXI of the GATT

At present there are 546 items at 6-digit level items remain under licence.

Standards and Technical Regulations

For the certification of products and systems for health and safety reasons

Article XX of the GATT

The Food Act No.26 of 1980 Sri Lanka Standards Institution

Plant and Animal Quarantine

This is to ensure that exotic diseases are not introduced through the importation of livestock and livestock products

Article XX of the GATT

The Plant Protection Act No.35 of 1999 The Animal Diseases Act No.59 of 1992

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The Measures that are in place in Sri The Measures that are in place in Sri Lanka-Lanka-Export Export SectorSector

Tariffs and Levies;Tariffs and Levies;

Export duties were withdrawn by 1992, except for Export duties were withdrawn by 1992, except for few items levied for few items levied for non-economic reasonsnon-economic reasons. Fiscal . Fiscal levies (Cess) and Royalty fees are levied on exports. levies (Cess) and Royalty fees are levied on exports. The Customs Department collects the levies and The Customs Department collects the levies and royalty on certain items on behalf of other royalty on certain items on behalf of other institutions.institutions.

The product categories that are subjected to The product categories that are subjected to Cess and Royalties.Cess and Royalties.Coconut ProductsCoconut Products QuartzQuartzConch shellsConch shells Raw HidesRaw HidesNatural rubberNatural rubber Cashew nutsCashew nutsNon-ferrous scrap Non-ferrous scrap Metal ChanksMetal ChanksIron or non-alloy steel productsIron or non-alloy steel products ElephantsElephantsTeaTea

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Case Studies in Case Studies in Sri LankaSri Lanka

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Export of aquaculture Export of aquaculture products to the EUproducts to the EU

Fisheries productsFisheries products to the EU were governed to the EU were governed by by regulations on import of animal regulations on import of animal productsproducts destined for human consumption destined for human consumption

These regulations required overall that there These regulations required overall that there be a be a monitoring systemmonitoring system in place to ensure in place to ensure that such that such products do not contain products do not contain excessive levels of residues of pesticides excessive levels of residues of pesticides and veterinary medicinal substancesand veterinary medicinal substances

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Aquaculture exports Aquaculture exports (con’d)(con’d) Sri Lanka was required to establish Sri Lanka was required to establish

such a system from the beginning such a system from the beginning including:including: Appointing the Fisheries Department as Appointing the Fisheries Department as

the Competent Authoritythe Competent Authority Identifying and obtaining accreditation for Identifying and obtaining accreditation for

testing laboratoriestesting laboratories Drafting and passing relevant regulations Drafting and passing relevant regulations

on quality of aquaculture productson quality of aquaculture products

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Aquaculture exports Aquaculture exports (con’d)(con’d) System took several years to System took several years to

establish but Sri Lanka is currently establish but Sri Lanka is currently recognized as a third country recognized as a third country permitted to export aquaculture permitted to export aquaculture products to the EUproducts to the EU

However, problems exist such as However, problems exist such as cost of testingcost of testing

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Export of bees’ honeyExport of bees’ honey Sri Lanka has a potential for export of Sri Lanka has a potential for export of

bees’ honeybees’ honey However, bees’ honey falls under the However, bees’ honey falls under the

same regulations as aquaculture productssame regulations as aquaculture products There is no monitoring system meeting the There is no monitoring system meeting the

stringent requirements of the EUstringent requirements of the EU There is no flexibility, despite the fact There is no flexibility, despite the fact

production of bees’ honey is generally production of bees’ honey is generally organic and will not use pesticides or organic and will not use pesticides or medicinal substancesmedicinal substances

This is a fledgling industry which could be This is a fledgling industry which could be helped by expanding into markets such as helped by expanding into markets such as the EUthe EU

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Export of bees’ honey Export of bees’ honey (con’d)(con’d) However, there is a problem of time However, there is a problem of time

in establishing this monitoring in establishing this monitoring system and submission of the system and submission of the monitoring planmonitoring plan

In addition, it is very costly to do the In addition, it is very costly to do the kind of testing required to satisfy EU kind of testing required to satisfy EU requirementsrequirements

In addition, some testing facilities In addition, some testing facilities may not be presentmay not be present

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Ban on Genetically Modified Ban on Genetically Modified FoodsFoods Sri Lanka also faced problems with regards Sri Lanka also faced problems with regards

to imposing its own SPS measures in to imposing its own SPS measures in respect of GMFsrespect of GMFs

Initially, Sri Lanka imposed regulationsInitially, Sri Lanka imposed regulations Banning the import of GMFs andBanning the import of GMFs and Banning the import of certain food types such Banning the import of certain food types such

as soya and tomatoes without a certification as soya and tomatoes without a certification they were GM freethey were GM free

However, pressure from large exporters However, pressure from large exporters from Northern countries led to Sri Lanka from Northern countries led to Sri Lanka suspending these regulations indefinitelysuspending these regulations indefinitely

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General Problems Sri Lanka General Problems Sri Lanka is facing or could faceis facing or could face Lack of technical capacity to ensure Lack of technical capacity to ensure

product standards are in conformity product standards are in conformity with technically advanced standards, with technically advanced standards, particularly those of developed particularly those of developed countriescountries

Lack of financial capacityLack of financial capacity To implement production methodsTo implement production methods To establish comprehensive testing facilitiesTo establish comprehensive testing facilities

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General Problems Sri Lanka General Problems Sri Lanka is facing or could face is facing or could face (con’d)(con’d) Need for specialized technical experts to Need for specialized technical experts to

defend Sri Lanka’s interests e.g. legal defend Sri Lanka’s interests e.g. legal experts in trade remediesexperts in trade remedies

Need for extensive networking and Need for extensive networking and cooperation between a wide cross-section cooperation between a wide cross-section of government institutions and private of government institutions and private sector companies/ individuals to ensure Sri sector companies/ individuals to ensure Sri Lanka’s interests are protectedLanka’s interests are protected

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SAARC Common Position on NTBs at SAARC Common Position on NTBs at WTO Ministerial ConferencesWTO Ministerial Conferences

““Reject the new forces of protectionismReject the new forces of protectionism that are that are disguised as concerns about the disguised as concerns about the environment, social environment, social conditions, labor standard, and all other formsconditions, labor standard, and all other forms of of non-tariff barriers”. These are not trade related issues non-tariff barriers”. These are not trade related issues and should be kept out of the multi – lateral trading and should be kept out of the multi – lateral trading system.system.

““The Uruguay Round negotiations did not result in greater The Uruguay Round negotiations did not result in greater market access for the exports of developing and least market access for the exports of developing and least developed countries as was expected, due to the developed countries as was expected, due to the existence of existence of ‘tariff peaks”,‘tariff peaks”, the phenomenon of tariff the phenomenon of tariff escalation, and the escalation, and the use of NTBsuse of NTBs in respect of products of in respect of products of export interest to the developing and least developed export interest to the developing and least developed countries. Action should be taken to ensure effective countries. Action should be taken to ensure effective market access for the exports of these countries”market access for the exports of these countries”

Least Developed countries should be granted duty-Least Developed countries should be granted duty-free accessfree access on an autonomous basis for their exports by on an autonomous basis for their exports by the developed countries. These should be the developed countries. These should be exempt from exempt from antidumping duties, safeguard action and NTBs.antidumping duties, safeguard action and NTBs.

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THANK THANK YOU !YOU !