1. NON-TARIFF MEASURES AND RELATED OBSTACLES TO TRADE THE BUSINESS PERSPECTIVE FIRST FINDINGS AND IMPLICATIONS FOR ARAB STATES By: Ursula Hermelink, ITC A presentation at the UN-ESCWA EGM in Tunis 06 December 2012

2. What is ITC? Mission ITC’s overarching goal is to help developing countries achieve sustainable development through exports. In particular it helps SMEs better integrate in the global trading system and reap the benefits of trade - to increase sales, export performance and hence revenues and to contribute to creating jobs and reducing poverty. UNCTAD: United Nations Conference on Trade and Development (formulation of trade policies for economic development through trade and investment) World Trade Organisation: Forum of multilateral trade negotiations, implementation of agreements and managing trade conflicts ITC enables small business export success in developing countries by providing trade development solutions to the private sector, trade support institutions and policy makers

3. 1.Short introduction to non-tariff measures (NTMs) 2.The ITC programme on NTMs 3.Survey results (general) 4.Survey results (Arab States) 5.What to do? 6.Conclusions

4. NTMs – What are they? Official policy measures on exports and imports, other than ordinary customs tariffs, than can potentially have an effect on international trade in goods, changing traded quantities, prices or both; Mandatory requirements, rules or regulations legally set by the government of the exporting, importing or transit country (in contrast to private standards which are not legally set); Can affect both exports and imports. 4

5. NTMs – Why are they important? Tariff rates have fallen to historic low levels National regulations are more important and used more often by governments as trade policy instruments Products need to comply with wide range of NTMs; NTMs often vary across products and countries and can change quickly Nature of NTMs has changed over time – they have become less visible and direct, but rather more complex Impediments companies face in relation to NTMs and their compliance are often linked to lack of capabilities, infrastructure and efficient procedures (“procedural obstacles”) in the country No transparency on and easy access to relevant information about NTMs that are applied by the destination market Policy makers often lack a clear understanding about the current obstacles to trade their private sector is facing – making it difficult to define policies and strategies overcoming these challenges 5

6. 1.Short introduction to non-tariff measures (NTMs) 2.The ITC programme on NTMs 3.Survey results (general) 4.Survey results (Arab States) 5.What to do? 6.Conclusions

7. The ITC programme on NTMs 7 Global objective: Key stakeholders in beneficiary countries are aware of non-tariff obstacles to trade that affect their products and are enabled to formulate options to address these obstacles. Key activities (Mar 2010 - Mar 2013): (1)Collection, classification and dissemination of NTM regulations; in collaboration with UNCTAD and World Bank (  integration of data into MAcMap) (2)Comprehensive business surveys on NTMs in 23 countries Mainly funded by UK DFID

8. Why do we need the business perspective?: NTMs and other trade barriers NTMs Regulations on trade and products, other than tariffs, which may negatively affect the international trade of goods. 8 Excessively strict NTMs E.g.: pesticides levels set by the EU on imported tomatoes are hard to comply with for Moroccan exporting companies Procedural obstacles (POs) E.g.: the analysis required by the EU to test the level of pesticides of imported tomatoes from Morocco is delayed because the laboratory in charge of the analysis (in Morocco or in partner country) is overstrained. Business environment: obstacles that are not related to NTMs but hinder international trade. E.g.: lack of port infrastructure. Trade barriers

9. The ITC Programme on NTMs - Survey countries

10. 10 1.Phone screens with all exporting and/or importing companies in the sample Basic information: address, main export product, status (exporter, importer or two-way trader), etc. Structure of the firm: no. of employees, share of female employees, etc. NTB experience : whether any of their products faced restrictive and burdensome regulations or related obstacles to trade during the last 12 months 2.Face-to-face interviews with exporting and/or importing companies that reported difficulties Additional characteristics of the firms such as the turnover and share of exports in total sales Exporting and importing activities of the company with all trade products (HS6- level) and partner countries recorded Relevant government-imposed regulations, affected products (6-digit level of the HS), the partner country, and the country applying the regulation (partner, transit or home country), the institution(s) involved, the reasons making the regulation burdensome The survey process consists of two steps:

11. 1.Short introduction to non-tariff measures (NTMs) 2.The ITC programme on NTMs 3.Survey results (general) 4.Survey results (Arab States) 5.What to do? 6.Conclusions

12. Who is affected? (1/2) Simple cross-country average based on 11 countries 12

13. Who is affected? (2/2) Country Number of firms in the phone-screen interview Share of firms facing burdensome NTMs Burkina Faso44260% Egypt86938% Jamaica60835% Kenya76474% Madagascar39353% Malawi14066% Mauritius60241% Morocco79443% Paraguay40661% Occ. Palestinian T.23057% Peru96040% Rwanda35474% Senegal26262% Sri Lanka52170% Trinidad and Tobago50034% Uruguay45854% 13

14. 14 Why are NTMs perceived as burdensome? * *Procedural Obstacles Most NTMs are reported as being burdensome due to Procedural Obstacles (POs) like administrative delays or lack of appropriate facilities.

15. 15 Most reported types of SPS / TBT measures (import-related measures, Chapters A+B) 37.3%Product certification 8.7%Testing 7.9%Inspection requirement 6.0% Labelling (e.g. product labels with information for consumers) 4.4%Fumigation 4.1%Origin of materials and parts 3.6% Tolerance limits for residues of or contamination by certain substances 3.5% Product characteristics, including quality or performance requirements 2.9%Product registration 2.6%Packaging 2.5% Authorization requirement because of: national security; protection of human health or safety; environmental protection; or prevention of deceptive practices 2.5% Restricted or prohibited use of certain substances in food and feed 14.0%Other Which NTMs are perceived as burdensome? (2/2) Simple cross-country average based on 11 countries

16. Does the partner country matter? 16 Burdensome NTMs applied by partner countries: developing vs developed Simple cross-country average based on data from 11 reporting countries

17. 1.Short introduction to non-tariff measures (NTMs) 2.The ITC programme on NTMs 3.Survey results (general) 4.Survey results (Arab States) 5.What to do? 6.Conclusions

18. Aggregate survey results for Arab countries (1/4) a/ Agriculture: simple average across Egypt, Morocco and Tunisia; Manufacturing: simple average across Egypt and Morocco 18 Figure: Share of NTM cases by sector and country applying the NTM – simple average a/

19. Aggregate survey results for Arab countries (2/4) 19 Fig. B: Share of burdensome NTMs and exports across trading partners

20. 20 Aggregate survey results for Arab countries (3/4) Figure: Agricultural exports: types of burdensome NTMs applied by partner countries

21. Aggregate survey results for Arab countries (4/4) 21 Figure: Manufacturing exports: types of burdensome NTMs applied by partner countries

22. Talking about ROOs….: Trade Agreements involving LAS members 22

23. Examples of problems reported (intra-regional trade) : ROOs (1/2) “…In many cases even with this preferential COO the company pays tariffs in most of the Arab countries.” “Although the products imported from Morocco are complying with the PAFTA rules of origin, the Customs Authority do not grant it the preferential treatment and they refuse the PAFTA certificate of origin. Their excuse is that the producing company is a French subsidiary functioning in Morocco.” “All entries required in the PAFTA certificate of origin must be written 100% in Arabic otherwise the certificate is refused. This is very difficult as some … technical specifications can't be translated in Arabic.” 23

24. Examples of problems reported (intra-regional trade) : ROOs (2/2) “According to the Pan Arab Free Trade Area (PAFTA), the customs authority ask for a mark of origin to be printed on the product itself in a way that can't be removed or erased. This can't be done in this company's case due to the nature of the products, which are big rolls of coil nets. The supplier was instructed to print those marks on a metal piece to be attached to the product but the Customs Authorities refused and the company had to pay tariffs.” “Issuing the certificate of origin (EUR 1) takes 5 days which delays the shipping process.” (case reported for exporting to the EU) “According to the context of PAFTA agreement, originating products shouldn't consist of any Israeli component. The Customs Authorities in some importing countries require the presentation of many documents and declarations to prove that this requirement is fulfilled. A certificate from the shipping line is required stating that the ship didn't pass through any Israeli port, which is really unnecessary. The other documents are hard to get.” 24

25. Examples of problems reported (intra-regional trade) : Technical measures “The Saudi authorities prohibits the use of genetically modified organisms (GMOs)- The product should be GMOs free. The Egyptian Ministry of Health is not able to test the products and issue the relevant certificate because of the lack of the appropriate facilities or equipped labs to do such analysis.” “The Lebanese Authorities changed the labelling requirements where each furniture piece should have a "Made in Egypt" stamp on it. There was no due notice for this modified requirement, that caused problems for the company when shipping a non-complying shipment thus a fine of USD 5000 had to be paid.” “The partner country often changes the required labelling requirements without due notice.” 25

26. Examples of problems reported (intra-regional trade) : Conformity assessment “The Saudi Customs Authorities require a comformity certificate for the product according to the European Standards (EN 817). This certificate is only accepted from a private third company called "InterTech" located in Alexandria. The cost of this certificate is very high (30,000 EGP) per shipment according to Intertech. The Customs Authorities refused to recognize or accept a similar certificate from the Egyptian Standardization Organization or the Faculty of Engineering.” “The Jordanian Customs requires the products to be tested against their standards where a sample is taken in Jordan and tested once it reaches the port. The testing process takes time and usually delayed for at least 2 weeks. Also they accepted no equivalent Egyptian certificate…” (Chemicals) 26

27. Examples of problems reported (intra-regional trade) : import authorizations “Yearly import authorization is required to import polyurethane sheets, that is based on a test conducted by the Department of Chemistry. Receiving the authorization is usually delayed. It is difficult and time- wasting to undertake the same process on a yearly basis especially when the company imports the same product from the same producer with a quality certificate.” “After complying with the strict technical specifications requirement, the company should receive an import authorization which is delayed for more than 5 months and it's not granted yet.” (case of export to Tunisia) 27

28. Examples of problems reported (intra-regional trade) “Despite having the PAFTA agreement with many Arab Countries, some of those countries ask for legalizing all export documents from their embassies against fees which delays the process & incurs high fees.” “The authorities in the partner country [Arab States] require product registration; however, despite registration the customs officials stop the goods claiming that they don't satisfy the national standards. The authorities are not transparent about their standards and those standards are never published. As a consequence, the importer has to pay bribes” “Importers of medicines are required to be registered by the ministry of health. In order to register, the company is required to comply with so many documents. The problem is the lack of a clear system leads to a huge delays, not all the required documents are asked at one time. s to clear the goods.” 28

29. Stylized facts from ITC NTM surveys Burdensome NTMs vary significantly depending on the company size, the sector affiliation and partner countries where products are exported RTA membership does not insulate from NTM-related problems A lot of problems are “home-made”, even if the NTM itself is applied by the partner country 29

30. 1.Short introduction to non-tariff measures (NTMs) 2.The ITC programme on NTMs 3.Survey results (general) 4.Survey results (Arab States) 5.What to do? 6.Conclusions

31. What to do? Selected examples from Morocco: Many companies unable to comply with SPS/TBT measures harmonization of domestic technical regulations with international standards Improvement of information about the norms and regulations in force Exporters are unable to prove compliance with NTMs at reasonable cost Accreditation of national laboratories Mutual recognition agreements Improvement of inspection and certification procedures; capacity-building of officials; more transparency /better communication of procedures Problems related to customs valuation Better training to officials to avoid wrong classification / valuation of products Independent and regular control of customs valuation practices  Scope for action at the national level: need for trade policy 31

32. 1.Short introduction to non-tariff measures (NTMs) 2.The ITC programme on NTMs 3.Survey results (general) 4.Survey results (Arab States) 5.What to do? 6.Conclusions

33. Conclusions Regional integration requires efforts beyond the removal of ‘conventional’ tariffs: o Non-tariff obstacles significantly hamper intra-LAS trade:  especially in manufacturing  especially due to SPS and TBT measures and Rules of Origin Good and bad news: many issues, in particular procedural obstacles, can and need to be addressed at home, e.g. w.r.t. implementation of existing rules, efficiency of institutions, lack of information, etc The simple existence of an FTA does not remove NTM-related problems: necessity to fully implement provisions related to elimination of non-tariff obstacles within agreements Foster public-private dialogue with the goal of removing burdensome obstacles to trade, thereby assisting companies become more competitive 33

34. ITC is contributing to regional integration and competitiveness enhancement in the Arab Region: ITC assists SME exporters to integrate into regional value chains, for example in Tunisia where a company adapted its products to integrate into the luxury accessories value chain in Morocco to export to a global market ITC provides support on the supply side to improve product design, quality and packaging of exported products, for example it has helped a Jordanian company export high-end home goods to Arab countries and Europe hence creating jobs for women ITC has been supporting a variety of Trade Support Institutions such as chambers of commerce in Tunisia, sectoral associations for leather in Morocco and the handicraft association in Jordan to provide improved business support services 34

35. http://www.tradeforum.org 35

36. http://www.intracen.org/publications 36

37. Comments or questions? You can contact me also at hermelink@intracen.org International Trade Centre (ITC) Palais des Nations CH-1211 Geneva 10, Switzerland Thank you!