The Advantages And Disadvantages Of Ntms

Published Date: 02 Nov 2017

What are ‘’non-tariff measures’’ (NTMs)? As the term implies, any policy measures other than tariffs can be included in NTMs that can impact trade flows. At a broad level, NTMs can suitably be separated into three categories.

A first category of NTMs are those imposed on imports. This category includes import quotas, import prohibitions, import licensing, and customs procedures and administration fees. A second category of NTMs are those imposed on exports. These include export taxes, export subsidies, export quotas, export prohibitions, and voluntary export restraints. These first two categories encompass NTMs that are applied at the border, either to imports or to exports. A third and final category of NTMs are those imposed internally in the domestic economy. Such behind-the-border measures include domestic legislation covering health/ technical/ product/ labor/ environmental standards, internal taxes or charges, and domestic subsidies.

Types of Non-Tariff Barriers

The non-tariff measure include of some constraint to trade. Here are some examples of the popular NTMs.

Licenses

A document which is issued by a national government allowing the importation of certain goods into its area is called an import license. Import licenses are believed to be non-tariff barriers to trade when it is used to distinguish in opposition to any other goods of another country so as to guard a local industry from foreign competition. The volume of import allowed is specified in each license, and the total volume allowed should not go above the quota. Importing companies can buy the licenses at a competitive price, or simply a fee. However, it is said that this distribution method endow with encouragement for political lobbying and corruption. certain restrictions can be imposed on imported goods as well as the amt of imported goods.

Quotas

A quota is a quantity restriction used in international trade, usually on imports, but it could also be on exports, focusing on licensing of the foreign trade that is nearly related to quantitative restrictions. This category includes global quotas-a system that protects domestic industries by being restrictive on the cost of international trade- and seasonal quotas.

Quantitative controls on foreign trade transactions are done through one time license. Quantitative restriction on exports and imports is a direct administrative type of government regulation of foreign trade. Quotas and licenses restrict the independence of enterprises in respect of entering the foreign markets, narrowing the range of countries, and also minimize the range of countries for transaction in case of certain commodities. However, it turns out to be that the system of quota and licensing exports and imports whilst establishing firm control over foreign trade in some particular goods, happen to be more supple and of use than economic instruments of international trade regulation. This is defined by the fact, that licensing and quota systems are a key instrument of trade regulation which is an important part of the world.

The result of this trade barrier is seen in the loss of consumer due to an increase in prices and limited selection of goods. An import quota controls the volume of many commodities that can be imported in a country during a specific period of time. An export restricts a certain amount of goods that can leave the country. The reason for imposing of export quota by country is due to the control of goods that is fundamental to the country and the manipulative price found on international level.

Embargo

 The incomplete or entire exclusion of commerce and trade with a particular country, in order to isolate it is called embargo.  A strong political measure imposed in an effort, by the imposing country, to remove a given national-interest result from the country on which it is imposed is considered as embargoes. It is same as economic sanctions and is often taken as legal barriers to trade, not to be confused with obstructions, which are usually taken to be acts of war. The same principle is used for most trade barriers: the obligation of some kind of cost on trade that increases the price of the traded goods. If many nations repeatedly use trade barriers against each other, then a trade war results.

Subsidy

A subsidy is a type of financial support paid to a business or economic sector. The government makes most subsidies to producers or distributors in an industry to stop the decline of that business or a boost in the prices of its goods or plainly to persuade it to employ more labor. Some examples of subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in cities; and subsidies to support the expansion of farm production and achieve self-reliance in food production.

Import deposits

Import deposits is a type of deposit required importers to put a certain of money in an account for a significant period of time whose purpose is to guarantee that import duties will be paid, or the deposit may simply be a non-tariff barrier intended to discourage imports.

Why NTMs

The drastic rise in the use of non-tariff barriers stemmed largely from the WTO new rules about reduction in tariff use, which formed part of the WTO’s mission to ensure free trade across the globe. While the WTO rules do allow for the use of NTBs in some circumstances, the specifications about when they can be used are very strict such that they can only be employed for purposes such as to guarantee health, safety or sanitation, or to safeguard non-renewable natural resources. Should NTMs be used for other purposes, they are deemed to be ways of evading free trade rules. Apart from the WTO, such rules, which are set to curb the use of tariffs as they are threats to free trade, are also laid out by institutions like the European Union (EU) and the North American Free Trade Agreement (NAFTA).

Another reason for the transition from tariffs to NTMs is that many countries, especially developed ones, do not have to rely on tariffs as a source of funding anymore, like they did in their early stages of development. They can afford to switch to other trade barriers that do not involve tariffs, but that still provide them with a means to regulate international trade.

Moreover, NTBs allow these countries to help weak industries or provide compensation to those industries that have been adversely impacted by the WTO laws on reduction of tariffs.

Also, it is a logical way for countries to respond to the reduction of tariffs - since it has been declared that tariffs are no more to be used, NTBs offer traders an alternate method of influencing the market.

Thus, NTBs can be quite similar to tariffs, apart for a few exceptions. After the laws of tariff reduction were enacted during the eight rounds of negotiations in the WTO and the General Agreement on Tariffs and Trade (GATT), those who persisted in believing in the concept of protectionism have turned to NTBs. In fact, most of the NTMs can be defined as protectionist measures.

In short, NTBs can be thought of as a ‘new’ means of protection which has replaced tariffs as the "old" method of protection.

Advantages and Disadvantages of NTMs

Advantages

Since the main purpose of NTMs is protectionism, the advantages of NTMs will also mainly be those of protectionism. Non-tariff barriers help protect the development of new industries against foreign rivals. If foreign industries compete with domestic industries that are not developed enough or large enough yet to take advantage of economies of scale, then NTBs, such as import quotas, can protect the ‘infant’ industry from too much competition through its maturing stages until it can compete on its own.

Similarly, NTMs also offer protection to certain economies against foreign countries that are interested to trade with them only because they know that the domestic economies will not be able to face competition from them and will eventually collapse, leaving them a monopoly of the domestic market. An example of such unfair trading is ‘dumping’. The barriers to trade protect the domestic economies from such countries with an unfair relative advantage.

It is believed that the use of NTBs can result in increased domestic employment. Since foreign firms create jobs abroad, NTBs such as import quotas, reduce imports, make domestic production rise instead, and thus create domestic employment. Also, reducing imports from countries with cheaper labour levels the competition compared to the higher wages being paid for local production.

NTBs, moreover, by cutting down imports, help countries boost those local industries that are concerned with the national security and also those industries which help give the country economic independence.

Disadvantages

The main disadvantage of NTMs is that they hinder free trade and the benefits that accompany the latter. The protectionist aspect of NTBs discourages competition from bigger industries and also from foreign countries. While this might help domestic firms and industries to grow at first, in the long run, it in fact dampens future growth. This is because, due to the lack of competition, domestic firms can then afford to provide a narrow choice of goods to customers, to lower the goods’ quality, and to raise their prices. Because of this inefficient production, there is also no more incentive for the firms to strive for constant innovation and excellence. Thus, ultimately, NTBs do not help in the future growth of firms.

There is another way in which NTMs drive up the prices of goods in the domestic economy. By restricting access to foreign countries where goods could be made more cheaply, more resources have to be employed domestically itself to make the same goods at a higher price.

Also, while free trade allows countries to benefit from the concept of comparative advantage, the use NTMs prevents countries from enjoying these benefits. If countries specialise only in the production of goods in which they have a competitive advantage, this allows each country to produce at the minimum prices. This efficiency in production benefits all parties to the trade. However, NTMs, by restricting trade, do not help in achieving that goal.

The use of NTBs can also result in trade wars. By raising trade barriers against a foreign country, the latter can decide to do the same in retaliation. The imports and exports of both countries are thus restricted, and this greatly reduces the markets open to them, lowering their scope for growth and efficiency. If many countries across the world engage in these trade wars, global trade and economic activity will suffer drastically. These retaliations can also quickly spread beyond the source of conflict and affect the countries’ other economy policies as a way to retaliate.

It can be seen that all participants can take advantage of free trade through efficiency of the market, for instance, increased choice and reduced prices. However, non-tariff measures also have their uses and are necessary in certain conditions. There must be a balance between the quest for efficiencies and the use of barriers to trade.

EFFECTS OF NON-TARIFF MEASURES (NTMS)

Effects on trade

It is generally assumed that NTMs have negative effect on trade, even if it has been elusive for quantitative assessment. Sometimes, these policy measures are referred to as barriers, when the emphasis is made on the difficulties an exporter may have to comply with them. In fact, NTMs can hinder exports for countries or companies when they are not able to pay the cost of adapting their product or production process to the norm of a trade partner. Then, another less competitive exporter may be able to take on a restrictive market if it complies with that regulation. NTMs would be trade distorting in this case.

However, NTMs may also facilitate trade when they reduce asymmetries in information between consumers and producers, for example about the quality or safety of the product. The effort of complying with NTMS could also help countries to upgrade capacities, (or mitigating institutional deficiencies for monitoring and enforcing regulations, in words of van Tongeren, Begin, Marette, 2009) in which case the ultimate development impact is positive for the exporting country. On the importing country's side, NTMs could reduce negative externalities, for example in the case of environmental threat or food safety.

Effects on Price

A quota is defined as an upper limit on the number of units of a commodity that can be imported into a country. When such a restriction is imposed, domestic consumers are prevented from buying an imported good, the supply of which is no longer perfectly elastic as it would have been in a free trade situation resulting in a rise in the price of the product. This can be better explained using a demand and supply diagram as follows:

If free trade prevails, with barriers to trade absent, at the world price ‘wp’, Q1 will be supplied by local producers and Q1-Q2 will be imported. In other words, the equilibrium quantity will be found at Q1. The curve ‘ABws’ will represent the supply curve to the local market. The requirement of a quota will lead to a reduction in the number of goods imported. If the quota decreases imports from Q1-Q2 to Q1-Q3, another supply curve, which integrates the quota amount (Q1-Q3), will be obtained. The world price "wp" no longer acts as the supply curve but instead the latter is represented by the curve "ABCSS". we can nothe that the new equilibrium will be at "E" and the new equilibrium price will be at "pq". It is clear that price has risen from the implementation of quota. This is explained by the fact that the supply of the commodity is now restricted causing a slight increase in the price of the commodity. The extent of the increase will depend on the quota imposed. The lower the quota, the higher will be the price.

A simple example can be taken to explain the above theory. Suppose you have milk imported freely into a country and account for 50% of the domestic demand. If government imposes a quota on the amount that can be imported, the supply of milk will fall giving rise to a shortage. This shortage will exert pressure on price which will finally rise to eliminate that shortage and restore the equilibrium.

Effects on society

Another measure is embargo. This is a complete ban on imported product. Such a measure can be imposed to protect the society as whole. For example, a country may ban or severely curtail the importation of things such as harmful drugs, pornographic literature and live animals. Had embargoes not imposed on such products, society would suffer enormous damage as they have high level of negative externalities

Effects on multinational

Import quotas generally have a negative impact on multinational companies. These enterprises such as Nike and General Motors are intensively engaged in international trade as domestic consumption only cannot meet their high targets. When a quota is imposed on their goods by a major buyer, MNCs must find other markets to supply their products, otherwise they will have to cut production and profits figure will suffer.

Effects on employment

However, import quotas affect positively domestic employment. The fall in imports will divert demand to local suppliers and the latter will have to increase production to cover the gap which foreign products used to occupy. This applies to domestic supplies that have the capabilities and were unable to compete internationally. In order to boost production, they will have to recruit more people. This will have a multiplier effect in the economy giving rise a lower unemployment rate and higher economic growth.

How globalisation is affecting NTMs?

Globalisation is a process by which countries are linked altogether in a peaceful manner as view to only one planet. In technical terms, it is described as being a process by which national and regional economies, societies and cultures have all been united via global network of trade, communication, immigration and transportation. Hence a worldwide movement towards economic, financial, trade and communications integration. Recently, globalization expanded its field to other activities such as social areas. At present, globalization also considers culture, media, technology, socio-cultural, political and biological factors.

The evolving nature of NTMS has gained an important place in international trade today. More recently, it has been considered in the annual World Trade Report of 2012. Most trade agreements clearly speaks of tariff reductions whereby leaving less than halfway entrance for NTMs. It has nonetheless the capacity to reduce the effectiveness of tariff reductions upon agreement. NTMs have ever since in its introductory mode been driven by multiple policy motives and are still subject to change. These policies in themselves have evolved through the years as countries forged agreements and became interdependent through globalization.

NTMs has become a necessity not only to protect domestic industries but to the globalized world as a whole. Globalisation raised changes in countries among which are increased social awareness, growing concerns regarding health, safety and environmental quality which led to increase in NTMs. For the better understanding of the impact of globalization on NTMs, trade in goods and services were considered. Examples of regulatory measures are Technical Barriers to Trade and Sanitary and Phyto-Sanitary measures in goods and regulations in services which have recently cropped up. These measures do not have a direct influence on trade but have a strong influence on trade agreements and amount of trade between countries. Some say that NTMs have been encouraged via globalization for a viable peace. Public policy can thus enhance trade flows in a positive or even negative way. Trade in services has evolved in recent years and is no longer similar to traditional trade. New policies came into force to handle these new trends. Globalisation relates to WTO. Trade in services has the relatively same importance as trade in goods for good networks between countries. The WTO knows they hold the same weight in international production affairs and hence measures to restrict trade and competition in the services market that could affect more than the sector directly concerned. Examples where cases are most suited are infrastructural services, spill-over effects on other services and goods.

Unlike in the past when NTMS role were solely to protect domestic producers from foreign competition, nowadays NTMs are more to do with public policy objectives. These policies not only consider protectionism but also take precaution measures. In the sector of health and environmental services, NTMS were recently boosted in numbers.

NTMS were found not to be an easy task to be observed and quantified, however with globalization, WTO observes that NTMS are meant to have a long stay with their several arrangements between countries which adds to the main agreements.

The emerging in change of NTMs with time is not protected against negative effects. NTMs may in other words reduce benefits gained from the main agreement, for example negate some tariff reductions. Moreover, non-tariffs measures have a long list of measures which are also difficult to quantify and also sometimes are invisible in the agreements. In addition to that, those measures are not regular to all countries that it is served and to that, their effect sometimes bring distortions in agreements between sectors and countries.

Globalisation is known to have brought changes or complete change in more than one country structure and future. It has greatly changed policies of countries and to that NTMs continue to be evaluated and are still expanding.

Quoting from the WTO Director General: "Regulatory interventions addressing market failures and international spillovers, with inevitable consequences for trade flows and investments are here to stay."

The foremost thought, hence, of NTMs is that it will not have a decreasing or reducing effect on the tariffs agreements between countries.

As deducted from above, globalization does not only bring positive results onto a country trade flow. As globalization strengthens alliances amongst nations, NTMs continue to be on the rise in their arrangements. NTMs may also be used as a tool to restrict trade flows in the case of where some countries might be oligopolies of certain commodities on the global market.

Technical Barriers to Trade and Sanitary and Phyto-Sanitary measures is said to be the source of last resort for some developing countries since it impacts the worst results on them. The reason is that these countries may be differently structured and may not be able to meet those criteria mentioned in the measures.

Though, globalization intensify the relationship between countries does bring both good and bad results, harmonious plans between countries may help to reduce the negatives effects. Globalisation has neared most of countries and consequently has brought help where such measures were not easily identified. In simple terms, it has allowed experiences to be shared in recognition and quantitation.

In the light of the above, globalization not only brought amendments in NTMs but also has greatly influenced its use in countries.

NTMs Measurement

Measuring non-tariff barriers remained one of the confusing answered questions for a long time enough. This is mainly because of their inconsistency in countries where they are applied. As these by themselves cannot be measured, their affiliations are quantified to give a result as the measurement of NTMs as a whole. Typologies of the affiliations are: frequency measures, price-change measures, quantity measures, rates of assistance, and indices deflators.

A brief discussion of these measures is now to be listed and considered below.

A. Frequency measures

Laird & Yeats (1990) exposed two frequency measures, namely, frequency ratio and import coverage ratio. Both of them are based on calculation of ratio of commodity lines subject to at least one NTM in total number of lines for the respective group of trade flows. The frequency ratio can be calculated by formula:

where Ni is category i of commodity in trade group; Di is dummy variable, Nt is general number of categories in trade group, i.e. i = 1,...,T . Dummy variable is used as indicator of NTM: where Di = 1, in good in category i is subject to at least one NTM; otherwise Di = 0.

In import coverage ratio, value of imports of commodities subject to at least one NTM is used as a weight instead, unlike the frequency ratio. That way, time factor is considered and it also helps to evaluate the importance of the NTM for the whole trade.

B. Price-change measures

NTMs often influence price and cause change. Under this section, a measurement on evaluation of changes in price due to the introduction of NTMs is considered. Unlike other measures, it allows direct comparison between impact of tariff and non-tariff trade barriers. Price-change measures are commonly used in international trade theory and a formula was derived; influence of trade restrictions in terms of price and quantity changes. Deardorff & Stern (1997) used the most known type of price-change measures which is tariff equivalent. In other words, it is calculated as growth in commodity price before and after use of NTMs. Despite all its positive characteristics, price change as a sole indicator for NTMs of a country is not sufficient. Moreover, the impact of NTMs on change on price is difficult to be taken out of any factors affecting prices.

C. Rates of assistance

Rates of assistance can be broken down into two types; nominal and effective rate of assistance. Nominal rate of assistance is founded on calculation of a rise in the gross returns from production resulting from protective measures. The effective rate of assistance is the most commonly used and can be calculated as follows;

;

where VAN is value added in case when the NTM are applied, and VAB is value added under free trade.

These measures fit theories perfectly, nonetheless have drawbacks as it requires mass information that is not always available. The effective rate of assistance is faced with another problem which is to differentiate between the different NTMs in its calculation.

D. Indices - deflators

Anderson and Neary were the first ones who brought the application of trade barriers to both tariffs and non-tariffs measures. They constructed two indices; mercantilist trade restrictiveness index and trade restrictiveness index. These are defined as deflators and when applied to undistorted prices are to produce the same trade volume (mercantilist index) or same real income (for trade restrictiveness index) as the initial set of trade distortions (Anderson & Neary, 1996; Anderson & Neary, 1999). Application of this method, however, yields problem of collection of necessary prices and differentiation of the impact of NTM from other changes.

To summarize all measures are good enough for measurement of general NTMs level in a country. However, criteria, benefits and drawbacks of the different methods must be cared when choosing for specific countries.

What are countries doing to alleviate NTMs?

A sensible approach of dealing with NTMs on a national, regional, or multilateral level would be to categorize them further as NTMs unnecessary (such as automatic licensing), NTMs potentially non transparent and discriminatory, NTMs that are transparent but discriminatory (selected technical regulations), NTMs that are transparent and apply to both domestic and imported goods could be retained (unless they are welfare-reducing).

Two methods at removing NTMS can be pursued. The first method which is the vertical approach is the identifying of NTMs measures which are most welfare-reducing. For example, the strategy planned by World Bank (2008b) for the EAC. NTMs are recognized in function of how much they restrain Intra-EAC trade and of their political economic complication. Figure 2 illustrate the Categorization of NTMs in EAC: a ranking by the facility of action for elimination.

Source: World Bank 2008b, figure 3.1 page 16

Knowing the capacity of restrictions in regional economic community and of its associate governments, the first quadrant (A and B) is the first target of EAC, which reflect NTMs that are mutually noncontroversial for EAC-wide consensus building for elimination and have an adverse on trade. Prioritising those NTMs located in quadrant B during the preparation of action plans for execution, the intra EAC trade would profit more.

The horizontal approach is the second approach which classifies priority areas and then eliminates NTMs afflicting these zones. The ASEAN has chosen the horizontal approach to eliminate NTMs by spotting 11 priority regions and putting NTMs into class of Red, Amber and Green boxes according to their restrictiveness, regulatory objectives and WTO consistency.

Removing NTMs can be done: (i) at the national level; (ii) at a regional level in the situation of a Regional Integration Agreement in which other countries take part; (iii) Multilateral, as in the Trade Facilitation negotiations at the WTO.

(i) When undertaken on a national stage, there is no apprehension about designation of power to a supra-national level. Nowadays since the vast majority of countries are involved in numerous reciprocal PTAs, harmonization and recognition at the regional level should be the aim and hence welfare-enhancing for all associates. An interesting national scheme of NTM elimination is presented by Mexico. In Mexico the number of permits, licenses and other information requirements in the transport and commerce sectors, was reduce from about one thousand in 1995 to fewer than 400 in 2000. Moreover, the Economic Deregulation Unit (UDE), founded as early as 1989, reconsidered over 500 regulatory suggestions between 1995 and 2000. Mexico’s regulatory structure was affected by about 90% in the process.

(ii) Regional. Removing NTMs requires agreement from superior authority; the supra-national level. Examples in developing countries are firstly APEC engaged in a Trade Facilitation Plan in 1995 forward to reducing transaction costs for businesses. Secondly the ASEAN has constructed a solid strategy to combat NTMs. Cases where ASEAN has eliminated NTMs are by following the 1995 plan. The EAC considered the elimination of NTMs in its trade policy.

- Some kind of NTMs was elimated by the EU and ASEAN. Examples are the border checks and other customs formalities on goods, reconsideration of regulations pertaining to health, safety or environmental protection.

- Some types of NTMs on multilateral trade can be removed by supra-national delegations. Examples are; the Single Action Plan of the EU on Public-Sector purchases of non-domestic origin, the AFTA trial to implement a source requirement to meet derivation, the ASEAN coordination with international standards for various TBTs on consumer health and safety.

(iii) Multilateral. Trade easing cooperation is explained by the sharp rise in trade within the industry, the increase in the exchange of intermediate goods, and the vertical expansion of production. Moreover production activities were transferred from developed to developing countries. Trade Facilitation negotiations enable the elimination of the red-tapes. These measures are transparent and hence difficult to be seen by officials. It is expected that market access and increased competitiveness will enable the recovery of fixed costs for LDCS.

Mauritius

Face with poor regulations such as wrong designs of rules and excessive red tape, Mauritius lag in market competition. Nonetheless following the dataset created by the World Bank, non-tariff measures are used as a tool to guide businesses and policy makers.

Mauritius is not the best one to meet the time limit of dealing with exports and imports transactions. For instance, Singapore takes 6 days to trade operations while Mauritius takes 12 whole days. This lag is concentrated particularly in imports. This is because of lack of coordination in the business environment. As from January 2009, more than 25 percent of import declarations had two requirements concerning different line ministries and agencies. In more than 5 percent of the cases, three to four import requirements were required. A large number of transactions of imports travel by sea which requires more compliance. a detailed study is needed to shed light on a minimum measure required to standardize essential areas like health and the environment and measures acting as barriers to competitiveness and trade.

India

NTMs in India were mostly exposed in exports of the key industrial sectors; SPS and TBT. These sectors include textiles, leather and chemical products, being more susceptible to health-related SPS standards and electrical and electronic equipment was the most open to technical regulations and standards.

The WTO noticed that India was one of the highest users of anti-dumping and a frequent user of security measures against other countries’ imports. Licenses in history of India show a non-preference of imports of finished goods. These licenses are commonly used for imports of raw materials to be used for export sectors of India. India and Pakistan signed an agreement recently to address the NTM issue. To that, both countries would perhaps have an enhancement in trade and lower mutual non-tariff barriers.

Elimination of non-tariff barriers and promotion of cross border trade in Rwanda and Tanzania

Recently, in October 2012, Ministry of Trade and Industry of the Republic of Rwanda and that of Tanzania proposed the eradication of NTMs in a meeting and as a consequence encourage Cross Border Trade.

The minister from Tanzania stated that it is the fact that trade relations between the two will be strengthened that foremost encouraged him to sign. He added that costs of doing business of both countries will be reduced.

Both countries agreed that the contract would be mutually beneficial to them. For instance, they agreed to jointly improve infrastructure and procedures at Rusumo border. Fast-tracking construction of the One-Stop-Border-Post, establishing Trade Information Desks, ensuring reliable power and interfacing of the Rwanda Revenue Authority (RRA) and Tanzania Revenue Authority (TRA) Customs Information Technology systems using RADDEX are examples of the collaboration.

It was also agreed that Tanzania would be the one to deal with projects and the modernization of the port of Dar es Salaam and construction of a new port at Bagamoyo and to extend the 24-hour operations from Dar es Salaam to other ports for facilitation for speedy clearance of goods. Moreover it is the one to verify that sealed container and empty trucks to ease trade at entry and exit point. The study of number of weighbridges, road blocks and checkpoints are to be critically analysed to prevent delays.

On Rwanda side, a request to the Tanzania was made for gathering of Lands, Housing and Human Settlements Development near Dar es Salaam port.

The AEC (Asean Economic Community) reducing the trade impact of NTMs

One of the key elements to achieve liberal flow of goods is the reduction or elimination of NTMs in trade transactions. The AEC brought forward some actions to reduce NTMs. Some of these are as follows

Enhance transparency by respecting the regulations of the Protocol and the setting up a very good security and surveillance system.

ASEAN Member has to remove NTMs identified previously.

Enhance transparency of NTMs.

These methods brought some results and these are categorised below.

The progress in elimination of the identified NTBs are noticed.

Voluntary submission of unidentified NTBs till then are added to the NTMs database.

Improvement in the surveillance and security system of ASEAN rules.

Custom assistance and development in the setting up of ASEAN as Single Windows.

Mutual Recognition Agreements on medical merchandises and electrical and electronic tools.

Elimination of NTBs in EAC

According to Article 13 of the Protocol of the EAC Customs Union, all the current NTB has been agreed upon to be prohibited with immediate effect. Moreover Partner States decided to devise a method for identifying and supervising the elimination of non-tariff barriers. This has lead to the reason why the EAC has incorporates a debate of NTB matters in nearly all EAC Council’s meetings. This has been concerning the establishment of the EAC NTBs system for the observation of the removal of NTBs and spreading this in all Partner state with the view of setting up institutions for the elimination of NTBs including national and regional checking system; developing; developing a NTBs online reporting device; and a time bound frequently being updated. Moreover, NTBs are being discussed within the infrastructure, customs, immigration, standards and private sector conferences all in the efforts to deal with the problem within appropriate establishments. In the consideration to constantly assess the NTBs popularity within the area, the usual meetings of the NMCs have been planned. As well, there is an online monitoring system that renders it likely for any shareholder to inform on the NTBs they face directly to the Secretariat.

The Elimination of NTMs in the EU

The EU market is the one where the removal of NTBs is based on three fundamental principle of (i) nondiscrimination; (ii) mutual recognition; (iii) Community legislation to ensure the functioning of the common market. The elimination of customs duties, quota restriction and other measures having equivalent effect to that of customs duties and quotas give rise to freedom in the movement of goods, services, persons, and capital. Anti-dumping, safeguards and countervailing measures which are indeed types of trade remedies are all not approved under the EU. Furthermore, from the Mutual Recognition, the sale of goods duly produced in another Member State (the 1979 Cassis de Dijon Case) may not be prevented by a Member State. Moreover new law was agreed to when existing rules (mostly on health, safety or environmental protection) differed too much across Members and starting in 1985 physical barriers (border checks and customs formalities) was removed.

SADC

Under the SADC Protocol on Trade, it is clear that Quota restrictions are not allowed. Before 2000, quota restriction on imports was present but now according to Article 7 of the protocol, this was curtailed and not allowed. However in certain cases, for instance food security, export quota is permitted. It is to be pointed out that SPS and TBT requirement which are often mess up to be NTBs are in fact only put in practice to protect human, animal, plant health and life. This no doubt hinders trade. The application of the SPS and TBT in view of not restricting trade is featured in the SADC Protocol on Trade. The SADC Member States assented to abolish all NTBs and not to enforce any new ones. Additionally, notwithstanding to avoid any unnecessary technical barriers to trade, the SADC Protocol boost Member State to make use of international standards on every occasion where technical regulations are deemed to be fundamental.

Conclusion

The GATT has a special approach towards NTMs, which has evolved throughout the years. The emergence of the WTO has helped to further develop this attitude towards NTMs. Laws aiming at reducing tariffs on the production of goods were enacted in the 8 rounds of negotiations in the WTO and GATT. As a result, followers of the concept of protectionism have brought about new NTMs like the TBT (Technical Barriers to Trade).

Another factor which has led to the boost in popularity of TBT is the rising quest for secure and environment-friendly goods and services. NTMS are mainly regulated by WTO agreements, originating from the Uruguay Round, and also GATT articles. Today, the use of NTMs is as widespread in the services sector as it is in trade of goods. The restrictions placed on the use of tariffs as barriers to trade has forced countries to turn to NTMs for their protectionist measures. NTMs have thus supplanted tariffs as a new form of barriers to trade. This, however, significantly impedes the free flow of international trade and eventually, even the world economic growth.