Presentation on theme: "Obstacles to Trade from the Perspective of the Business Sector: A Cross-Country comparison Third Meeting of Trade Ministers of Landlocked Developing Countries."— Presentation transcript:
Obstacles to Trade from the Perspective of the Business Sector: A Cross-Country comparison Third Meeting of Trade Ministers of Landlocked Developing Countries By Mondher Mimouni, ITC Ezulwini, Swaziland, October 2009
Plan Obstacles to trade Raising concern of the business sector Trade costs Empirical evidence Types of obstacles ITCs Project on non-tariff Measures NTM classification Official data collection Survey of the business sector perceptions Conclusions
NTMs – Why important for ITC?
Definition of non-tariff measures (NTMs) Several definitions exists. Definition adopted by multi-agency team working on NTMs: Non-tariff measures (NTMs) are policy measures, other than ordinary customs tariffs, that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both. Difficult to make a distinguish between NTMs and non-tariff barriers. Business sector is most concerned with the costs associated with NTMs and related trade cost.
Trade costs composition (I/III) Trade costs include all costs incurred in getting a good to a final user other than the marginal cost of producing the good itself: transportation costs (both freight costs and time costs); policy barriers (tariffs and non-tariff barriers); information costs; contract enforcement costs; costs associated with the use of different currencies; legal and regulatory costs; local distribution costs (wholesale and retail).
Trade costs composition (II/III) Estimate of the tax equivalent of representative trade costs for industrialised countries is … 170%. This number breaks down as follows (2.7=1.21*1.44*1.55): 21% transportation costs have to be added to 44% border related trade barriers, plus 55% retail and wholesale distribution costs. The border related barrier is a combination of direct observation and inferred costs. Anderson and van Wincoop (2004)
Trade costs composition (III/III) High transaction costs in trade are not simply analogous to high tariffs, which arise from a single policy instrument and can be reduced by a single action. High transaction costs are associated with interactions among multiple layers of transport, infrastructure, policy, and geography, often involving several countries. This means that trade facilitation efforts targeted at a single point in the process can be easily frustrated. With the increased supply chains interdependency, imported products delivery delays have turned into a severe constraint on production. This is why customs clearance and delivery of imported products have become a quite important determinant of the production process. That is why Trade Facilitation has become a crucial aspect of trade policy.
Documents, time and cost for export and import Documents to export (number) Time to export (days) Cost to export (US$ per container) Documents to import (number) Time to import (days) Cost to import (US$ per container) LLDCs examples Bhutan Bolivia Botswana Burkina Faso Burundi Central African Republic Chad Ethiopia Lesotho Malawi Mali Niger Swaziland Uganda Uzbekistan Best practice economies Denmark5 France22 Malaysia450 Singapore 3439 Developing economy Egypt World Bank, Doing Business Report 2009
Estimated Ad valorem Tariff Equivalent for trade facilitation barriers in Egypt Chahir Zaki (2009)
Cost Rwandan coffee: 1,500 km to Mombasa (up to 40% of total costs) West Africa shea butter producers: high transport costs from poor roads and vehicle repair costs Uganda apparel: transport costs add the equivalent of an 80% tax on clothing exports Unexpected detours increase costs Source: N. Christ & M. Ferrantino(2009) (extracted from M. Ferrantino presentation Chile 2009) Land Transport for Exports: The Effects of Cost, Time, and Uncertainty in Sub-Saharan Africa
Time Kenya–Uganda border: avg. 2 days to cross Some West African corridors may have roadblocks every 30 km In 2003, wait at Bietbridge reached 6 days Uganda–Rwanda border: avg. 1 day to cross CAR–Cameroon border: up to 2 weeks to cross Unexpected detours increase time Source: N. Christ & M. Ferrantino(2009) (extracted from M. Ferrantino presentation Chile 2009) Land Transport for Exports: The Effects of Cost, Time, and Uncertainty in Sub-Saharan Africa
USAID (2009) West Africa Trade Hub Road transport corruption: Landlocked countries more affected
Developing Country Exports Decline in 2009 Decline in Imports from Developing Country Groups (USD Billions) Importing countries: USA, EU27, Japan, Switzerland, China, Turkey, Australia; Period: Q , 2009 Source: TradeMap, Market Analysis Tools, International Trade Centre, Decline in Imports from Developing Country Groups (USD Billions) Imports Q Imports Q % Change Exporter World$ 5,584.2$ 3, % LDC$ 61.2$ % LLDC$ 46.5$ % SIDS$ 66.5$ % SSA$ 137.2$ % SVE$ 55.7$ % Imports Q Imports Q % Change Per Capita Change* Exporter World$ 4,566.3$ 3, %$ -181 LDC$ 17.7$ %$ -3 LLDC$ 16.0$ %$ -15 SIDS$ 50.0$ %$ -232 SSA$ 49.7$ %$ -20 SVE$ 39.1$ %$ -38 Decline in Imports from Developing Country Groups (USD Billions) exl HS27
Non-tariff measures and trade liberalisation Shallow liberalisation (only tariff elimination) can in certain cases lead to a small welfare decline. Deep integration (inlcluding elimination of regulatory barriers and red tape and an improvement in the business environment) can results in the substantial welfare gains. Example: Egypt-EU - Egypt already has duty-free access to the EU for manufactures. Given Egypts trade patterns, the loss in tariff revenues that will be incurred outweighs any trade creation. - Deep integration can results in welfare gains (more than 4% growth in real GNP) Hoekman, B. and D. E. Konan (1999), Konan, Denise and Keith E. Maskus (1997)
Types of NTMs: Current situation Only limited information on NTMs existing Existing information scattered across various countries & various sources within countries Poor access to existing information Time consuming for exporters to research measures that may concern their products
Urgent need for a common international NTM classification and methodology to systematically collect, analyse and disseminate data on NTMs This can address the following issues: Lack of common definition No agreed taxonomy Inadequate data: Existing data is limited, not structured and not comparable No agreed methodology for quantification: In-depth analysis currently not possible due to lack of information Implications
Multi-Agency Team Members: FAO, IMF, ITC, OECD, UNIDO, UNCTAD, World Bank, WTO. Observers: EC, USDA, USITC Biannual meetings Agenda Provide clear and concise definition of NTMs Develop classification system of NTMs to facilitate data collection process and analysis Devise ways to collect efficiently the information on NTMs taking into account existing mechanism of collecting specific elements of NTMs by each member agency Provide guidelines for the use of data, including their quantification methodology
ITC-UNCTAD pilot project – Activities Country programme in 7 pilot countries: Large-scale business survey ( face-to-face interviews) with exporters and importers about their daily experiences with NTMs; Collection and classification of official NTM data applied by the pilot countries; Inititialisation of sustainable country-level data collection mechanism; Inititialisation of public-private dialogue. Initialisation of official NTM data collection from major importing countries (share in world imports larger than 1%; including EU, US, Japan, China, Canada, Russia, Mexico, Turkey, etc.)
The way forward Official launch of new NTM classification (5 November 2009) UNCTAD Group of Eminent Persons Meeting ITC-UNCTAD collaboration on the collection, classification and dissemination of NTM regulations Data collection: Targeting 50 countries by year (ITC and UNCTAD), Collaboration with national and regional partners, (ALADI, ASEAN, COMESA, monitoring intra-regional NTMs); priority on major importing countries (>1% of worlds imports) Dissemination: New, integrated application on market access data, including NTMs (ITC, UNCTAD, World Bank). ITC country projects on obstacles to trade (company surveys) : Roll-out in 27 countries; financed by DFID
Collaboration on NTM: official data NTM Classification: 16 Chapters
Official data on NTMs (I/III) Example: Descriptive overview of applied measures/regulations by the Philippines
Official data on NTMs (II/III) Example: Applied measures/regulations and imports in the Philippines
Company level survey on non-tariff barriers (NTBs) experienced by the business sector (I/II) Interview period:July-September 2008 Objectives: Identify measures that companies perceive as non-tariff barriers and their possible patterns across sectors, countries and regions; identify potential bottlenecks at the national level. Countries: Brazil, Chile, India, the Philippines, Thailand, Tunisia and Uganda Nb. of responded companies: responded companies in total ( per country) Nb. of contacted companies contacted companies Face-to-face interviews Method:
Categorisation of obstacles to trade New classification of non-tariff measures that has been prepared in the framework of UNCTADs multi-agency initiative on NTMs. Questionnaire Companies were asked to report cases of non-tariff barriers impeding their trade. Each case includes a reference to 1 product (or product group) 1 export destination, 1 measure according to the new NTM classification and the related procedural obstacle they face in relation to the applied measure. Example of one non-tariff barrier case: Export of Cane or Beet Sugar from Uganda to Burundi, Inspection and clearance requirement, Too complex mechanism. Company level survey on non-tariff barriers (NTBs) experienced by the business sector (II/II)
Survey: Key Findings from 5 Countries* * One landlocked country (Uganda) and four developing countries (Chile, The Philippines, Thailand, and Tunisia) The analysis suggests that trade barriers vary considerably across countries, sectors and trading partners. Destination countries: Many obstacles to trade are experienced when trading regionally. Many obstacles to trade are highly concentrated on specific sectors – sometimes, these sectors account for a major share in exports to this destination, sometimes only for a marginal share. The affected goods often enjoy preferential tariff treatment by the destination country. The experienced obstacles to trade can be often associated with a lack of infrastructure and efficient procedures in the country of origin.
Survey:Types of Reported Barriers *Based on the data analysis for 5 countries: Chile, the Philippines, Thailand Tunisia, Uganda
Survey: Export destination matters
Survey: Intra-regional trade and NTBs in Uganda
Selected results from the survey of the business perceptions in Uganda Overwhelming number of the interviewed exporters complained about poor infrastructure (roads and railway), high air freight charges, power shortages, access to loans, low skills on technology, low access to information. Very few comments concern destination markets outside Africa (EU, US, Asian markets). The government should standardise and improve on its facilities like warehouses and cold rooms. Sometimes the Entebbe cold room malfunctions and this leads to spoiling of many flowers awaiting export, thus revenue is lost. Trade with Sudan is really ok. The only problem is roads. Transport from Mombasa to Kampala is more expensive than transporting a container from China to Mombasa.
Survey: Business environment at home matters Selected results from the survey of the business sector in the Philippines: Procedures in the Philippine Customs (89 reports): the behaviour of the customs officers (46; 52%) - corruption (25) - too slow (17) recognizing other registrations (3) inconsistent (1) increasing rate of duty / varying rate of duty (11; 12%) excessive documentation causing delays (6; 7%) regulations to obtain export permit to strict (6; 7%) Certificates needed from the Philippine authorities (169 reports) the Certificate of Origin (41; 11%) the phytosanitary certificate needed from the Bureau of Plant Industry (BPI) (30; 8 %) the fumigation certificate (19; 5%) too detailed, strict or excessive documentation (17; 4,5%) documents should be authenticated by embassy (8; 2%) quarantine clearance (8; 2%)
Survey: Imports are also affected Selected results from the survey of the business sector in Tunisia: ChapterTotalShare Technical barriers to trade814 77% Para-tariff measures123 12% Finance measures37 4% Sanitary and phytosanitary measures35 3% Other technical measures24 2% Anti-competitive measures6 1% Rules of origin5 0% Quantity control measures5 0% Price control measures1 0% NA2 0% Grand Total % Table 11: NTM Impacting Imports in Tunisia Proportion of cases reported (product and partner ) per different NTM chapters
Survey: Reported Procedural Obstacles
Conclusions Survey and research show that NTBs are a major impediment to trade Part of the NTBs are directly related to business environment In many cases intra-regional trade is more affected. Business sector in the landlocked countries experience more obstacles to trade due to Implications for transport (cost, time, uncertainty) Requirements to comply not only with domestic and partner country requirements but also with the requirements in the transit country(ies) The target ITCs project on non-tariff measures: Identify problems (through business surveys and official data collection) Discuss them with national, regional and international institutions In order to be effective, economic policies should address NTBs.