- Non-Tariff Measures are a useful tool for consumer protection, quality assurance, market credibility, and creating a level playing field.
- However, imposition of non-tariff measures may act as a restriction to free trade as it leads to increase in compliance burden.
- The most commonly used non-tariff measures include Technical Barriers to Trade (TBTs) and Sanitary and Phytosanitary (SPS).
- Technical Barriers to Trade are intended to achieve policy objectives such as protection of human health and safety, protection of the environment, or prevention of deceptive practices.
- SPS measures seek to strike a balance between the right of WTO members to protect health and safety, and the need to allow smooth flow of goods across international borders.
- Despite certain challenges, non-tariff measures are expected to become increasingly important in trade regulation as domestic interest in health, quality, and the environment become increasingly relevant.
Introduction
Non-tariff measures (NTMs) are governmental actions, other than customs or other duties, that may have an economic impact on global commerce in products. Along with tariff measures, they are often used as tools shaping international trade. Non-tariff measures (NTMs) are policy measures that play a crucial role in tradе regulation and can have an effect on international tradе. The phrase "NTMs" encompasses a diverse range of measures, including Technical Barriers to Trade, Sanitary & Phytosanitary Measures, Quotas, Price Control, Distribution Restrictions, Government Procurement, Pre-Shipment Conditions, etc.
The primary goal of NTMs is often protection of the environment, public health, and quality of the material. These measures are intended to regulate supply in one's own domestic market, as they are invariably applicable on imports and at times even on exports. Further, while the purpose of NTMs is ensuring required quantity and quality of the materials, the certification process, extensive information required, stringent compliance norms, and procedural expenses have a significant impact on trade for the product attracting such measures. Thus, while the objectives of NTMs may vary, they invariably have an impact on international trade.
Purpose of NTMs and how they help in trade regulation?
- Non-tariff measures are applied for a variety of objectives, which can broadly be summarized as below.
- Consumеr Protection: NTMs are primarily designed to protect consumers from substandard and unsafe products. Thеy help in ensuring that consumers rеcеivе products that meet specified quality standards, which reduces the risk of health hazards and financial losses.
- Quality Assurancе: NTMs mandate that the manufacturers conform to specific quality standards. They help in еnhancing the ovеrall quality of products availablе in the markеt and promote a culturе of quality assurancе among manufacturers.
- Markеt Crеdibility: Products that comply with requirements of NTMs oftеn carry the cеrtification mark, which is a symbol of quality and safety. This mark is an evidence of the credibility of that product in the markеt and can lеad to increased consumer trust.
- Lеvеl Playing Fiеld: NTMs crеatе a lеvеl playing fiеld for manufacturers by еstablishing uniform quality standards. This еnsurеs fair compеtition and prеvеnts unscrupulous manufacturers from gaining an advantage by producing substandard products.
However, there has been growing evidence that non–tariff measures have a significant impact on trade flows, prices, and economic development. Nontariff measures imposed can significantly increase the compliance burden, thereby acting as a restriction to free trade.
Who imposes NTMs?
Non-Tariff Measures are imposed based on decisions taken by the regulating authorities, such as authorities for food safety, consumer protection, defence, drugs, cosmetics, and the telecommunication sector of the Government. The regulating authorities impose necessary licensing or registration conditions, which are prerequisites for supply for domestic and imported goods and become a part of the foreign trade policy of respective country.
Commonly used types of non-tariff measures
The most commonly used types of non-tariff measures are: .
- Technical Barriers to Trade (TBTs)
- Sanitary and Phytosanitary (SPS)
Technical Barriers to Trade (TBTs)
Technical Barriers to Trade are technical regulations and standards, intended to achieve legitimate policy objectives such as protection of human health and safety, protection of the environment, or prevention of deceptive practices. The WTO Technical Barriers to Trade Agreement ensures that such measures are imposed in a non-discriminatory manner, and do not create unnecessary obstacles to trade. In order to ease trade, members are strongly encouraged under the TBT Agreement to base their measures on international standards. It also seeks to establish a stable trading environment through transparency in the regulations.
The TBT Agreement is applicable to all products, including industrial and agricultural products. In essence, the Agreement requires that TBTs should not result in products imported from any member country getting a less favourable treatment than domestically produced product or the product imported from third countries. Where the proposed TBT is not in accordance with an international standard, the member imposing the TBT is required to notify the proposed measure to other members through the WTO Secretariat and allow them to present any comments on the same. The Agreement envisages that where a member applies a TBT that has a significant effect on trade of another member, such member may be required to justify the technical regulations introduced. Finally, the Agreement requires that the procedures for examining conformity with the TBT be applied in a consistent and non-discriminatory manner, and not applied with a view to create unnecessary obstacles to trade.
India has also imposed TBTs in the form of technical standards and regulations like Bureau of Indian Standards, labelling/ packaging & storage requirements, Customs procedures, technical regulations in electronics & IT, Pharmaceuticals & medical devices regulations, environmental standards, intellectual property rights. For instance, recently, Quality Control Orders have been imposed on various products such as steel products, copper products, polyester yarn and fibers, and a host of other products.
Sanitary and Phytosanitary (SPS) Measures
The Sanitary and Phytosanitary Measures are measures introduced to ensure safety of products. They are governed by the Agreement on Sanitary and Phytosanitary Measures, which seeks to strike a balance between the right of WTO members to protect health and safety, and the need to allow the smooth flow of goods across international borders. The SPS Agreement recognizes the right of WTO members to adopt legitimate measures to protect public health, and animal and plant health, while ensuring these measures are not applied for protectionist purposes.
The Agreement provides that measures which conform to international standards, guidelines or recommendations shall be presumed to be consistent with the relevant provisions of the WTO Agreements. The Codex Alimentarius Commission (food safety), the International Plant Protection Convention (plant health), and the World Organization for Animal Health (animal health and diseases transmissible to humans) are three pertinent international expert bodies that have developed the health and safety standards that WTO members are encouraged to base their regulations on. However, members are allowed to impose measures which result in a higher level of protection, subject to the conditions of the Agreement. WTO members seeking to enforce more stringent regulations must be able to support their actions with a scientific evaluation of the dangers to public, animal and plant health.
SPS Measures imposed by India include food safety regulations such as those implemented by FSSAI, animal quarantine and certification requirements, plant quarantine regulations, residue limits for pesticides, veterinary health certificates, seafood export and import regulations, and phytosanitary measures for wood & timber products.
Challenges
NTMs are aimed at regulating quality and are effective instruments for regulating the supply of goods and services in the market. However, these benefits come along with a few challenges. Some of these are mentioned below.
- Compliance Costs: Achieving compliance with NTMs can be costly. It may need investments in upgrading facilities, acquiring tеsting equipment, and obtaining certification.
- Complexity: NTMs can be complex, with stringent technical requirements. Manufacturers and traders may find it difficult to understand and implement these standards, especially if they lack technical expertise.
- Enforcement Challenges: Ensuring that targeted industries comply with NTMs can prove to be challenging for regulatory authorities.
- Impact on Innovation: Some argue that strict adherence to NTMs may stifle innovation, as the industry may focus on meeting existing standards rather than developing new and innovative products.
Conclusion/ Outlook
Despite their challenges, NTMs are anticipated to become increasingly important in trade regulation as important in trade regulation as domestic interests in health, quality, and the environment have become increasingly relevant. This increase in reliance on NTMs could be driven by protectionist tendencies or legitimate objectives. However, the diverse and complex nature of NTMs can create challenges for businesses due to compliance requirements. In this regard, it becomes important to ensure that the requirements of various WTO Agreements, such as the Agreement on Technical Barriers to Trade and Agreement on the Application of Sanitary and Phytosanitary Measures, are complied with, to ensure that any measure imposed does not lead to inconsistencies with the WTO obligations, and bring the measures under scrutiny by the WTO Dispute Settlement Body. Nevertheless, to the extent that such measures are imposed for bona fide purposes, and are not discriminatory, they may serve as valuable tools for regulating supply in the country.
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Originally Published March2024
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