The 2012 World Trade report has said that Non Tariff Measures (NTM) are creating more trade barriers than the orthodox tariffs and quotas. So the question arises what are the Non Tariff Measures and how they restrict the trade activities between the economies?
Definition of Non-Tariff Measures-These are policy measures that are very different from the ordinary custom tariffs and have a devastating effect on the international trade of goods. They have deepening effect on the price and quantity of the traded goods and sometimes they can affect both the quantity and price simultaneously.
Recent Trends of the Non-Tariff Measures – International trade has been instrumental to not only the distressed economies but also to the developed economies. As a result of which numerous trade agreements have been signed off recently to build a harmonious relationship between the economies. But in times of crisis as economies cannot directly break any of the clauses incorporated in the trade agreements in relation to quotas and tariffs, they have been rampantly using the Non-Tariff Measures.
How and Where Non-Tariff measures are implemented:
Recently in 2012, the Guatemala through implementation of Non-Tariff measures in the form of strict safety and labeling standards has been successful in restricting imports of beef from Nicaragua, another Central American economy. Though CFAFTA-DR still exists between most of the Central American economies three countries namely Guatemala, Nicaragua, and Honduras have not been adhering to the standards. In a increasing globalized, competitiveness world non-tariff measures affect the prices of the imported good, cost to the importing countries, the competitiveness of the private sector and the welfare to the overall economy.
One of the ramifications of the Non-Tariff measures is the sanitary and phytosanitary measure employed mostly to the agricultural and processed goods. These measures have led to an average increase in import prices by 30%, which unintentionally affects the prices the consumers pay. Sometimes the Non-Tariff Measures are really deceptive and executed in an inefficient and bewildering manner, that increases the compliance cost thereby delaying the entrance of the imported goods. This not only increases the selling price of the imported goods but also frustrates the importers who sometimes prefer not trading with these economies. Non-tariff measures have replaced the straightforward import tariffs and are being extensively to support the domestic producers in respective countries.
Effective Measures that can be taken to lessen the negative consequences of Non-Tariff Measures:
The respective countries trade sanitary registries work haphazardly and do not have a common database or some electronic mechanism that would make all the paperwork less cumbersome and fastidious. For example if a Nicaragua beef trader has registered his beef in Guatemala and decides now to trade with Honduras the trader again has to produce the paper works that take ages to be verified. Some strict policies such as initiation of an electronic database similar to ALADI in South America would drastically aid the importers and exporters keep track of the changing regulations and help them get it done faster and more efficiently. As a result of which the import prices of the goods would plummet. And the reduction of food prices in Central America would be monumental in decreasing the poverty, and helping the people in living a normal healthy life.
To conclude the non-tariff measures if they are more transparent in nature would greatly help the trading partners to endorse in lot of trade agreements and benefitting them by reduction in poverty, unemployment, trade deficits, and most importantly correct price determination for the destitute and impoverished.