The advent of the COVID-19 pandemic and its continued presence urged countries to turn inward and primarily safeguard national interests and impose immediate export and import controls through non-tariff measures. Going forward, as economies recover, such international trade policy approaches needs to be deeply scrutinized and further streamlined.
- Non-tariff measures are critical trade policy instruments often imposed to counter market failures such as asymmetric information and negative externalities.
- However, with evolving markets and shifts in the business environment, these measures pose challenges to exporters, importers, and policymakers.
- As the world transitions into a new normal with strict social distancing protocols in place, international trade policy measures need to be deeply scrutinized and further streamlined to ensure the resilient recovery of economies.
- It becomes significant to ensure that these measures be lifted to move the economies to a stable recovery with cooperation and integration of economies. A transparent network based on cooperation and integration among the countries is essential.
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Non-tariff measures are critical trade policy instruments often imposed to counter market failures such as asymmetric information and negative externalities. These policy instruments include technical and regulatory standards for non-trade-related goals such as health and environmental protection. These measures are of two types:
(i) Sanitary and Phytosanitary (SPS) measures and
(ii) Technical Barriers to Trade (TBT)
However, with evolving markets and shifts in the business environment, these measures pose challenges to exporters, importers, and policymakers. As an exporter or importer, the ability to gain from international markets and trade arrives only with compliance to these standards and restrictions. For a policymaker, on the other hand, considerations regarding the restrictive nature of these measures are pivotal.
The difference in such imposed technical measures in varying countries is noteworthy. These differences often lead to increased compliance requirements, trade costs, and logistical arrangements. Medium and small exporters of developing nations are adversely and disproportionately affected by this phenomenon. Instances of exporters’ exclusion from the trade scenario have also been cited.
The advent of the COVID-19 pandemic and its continued presence has urged countries to turn inward and primarily safeguard national interests. Imposed to achieve essential and legitimate objectives, they have impacted the volume and speed of export and import in the world market.
UNCTAD[1] identified four objectives for imposing urgent export and import restrictions. These included:
(i) To ensure adequate and affordable domestic supplies of essentials and medical goods for combatting the virus;
(ii) To eliminate entry of potential disease carriers into the national borders;
(iii) To ensure product quality and safety;
(iv) To pursue economic objectives (Protect domestic industries − COVID financial relief for businesses/ otherwise − Manage domestic demand and supply & Relieve pressure on national currency).
These measures continue to have both positive and negative implications on domestic and world markets. To achieve these objectives, an exponential increase in licensing, packaging, and labelling requirements was witnessed. In addition to this, the countries impose several quality assessments to ensure entry of efficient products in times of crisis. Furthermore, given the associated losses and economic downturn that the global economy continues to face, countries deemed it essential to safeguard their industries and enterprises by promoting domestic products and maintaining incomes.
However, as the world transitions into a new normal with strict social distancing protocols in place, international trade policy measures need to be deeply scrutinized and further streamlined. This is pivotal to ensure the resilient recovery of the economies, as the interdependence could contribute extensively in regaining the momentum of these developed and developing nations as they move out of isolation and lockdowns.
It is imperative to note that while some of these restrictions continue to be necessary and pivotal to maintain public health & safety standards in the home countries, others have severe negative implications on the economic and developmental scenarios of the countries and also their trading partners.
For instance, the global shortage of medical equipment, testing kits, and remedies during the first and the second waves of the pandemic justified countries’ urge to impose restrictions on the export of such critical supplies[2]. This is particularly distressing for the status of global value chains, particularly in times of a global crisis like COVID. However, the restrictions on food exports appeared superfluous and indicated a reaction to immediate storage and panic buying.
These trade measures were implemented with an understanding that they would be temporary to safeguard the nations’ immediate interests. Therefore, it becomes significant to ensure that these measures be lifted to move the economies to a stable recovery with cooperation and integration of economies. If mishandled, these can transition into market-distorting measures[3].
Simultaneously, countries may also contemplate converting these temporary regulations into permanent measures, given that they bring more gain to the economies and global markets at large. For example, tariff reductions or exemptions for medical supplies, and trade bans of wildlife have more positive implications than negative ones. Therefore, to achieve this, a transparent network based on cooperation and integration among the countries is essential.
Options could be to streamline NTMs and trade regulations between industries; to make information on industry-specific NTMs accessible and understandable even by outsiders, or to build the capacity of producers to quickly adapt to NTMs of other industries. Moreover, countries should prepare policies and regulations to cope with the situation in the future when vaccines against COVID-19 are developed or another crisis comes, so that they can smoothen the production and distribution of the vaccines.
Also, trade measures that facilitate the sourcing of quality information, communication equipment and devices and that promote the digital economy will buffer the shock of another crisis. Efforts to eliminate or replace measures such as quantity control measures and contingent trade protective measures should be made to counter the extensive trade-distorting effects that these policies have.
For instance[4], tariff quotas and import licensing requirements should be replaced with tariffs and the ex-post reporting of imports based on customs entries, respectively. Technical measures such as Sanitary and Phyto-Sanitary and product standards should be streamlined or unified with international standards to reduce their trade-distorting effects, while maintaining the non-trade policy objectives such as protecting human, animal, and plant health.
Given the disproportionate impact on least developed countries as an aftermath of the pandemic, the need to simplify and harmonise requirements from non-tariff measures has come to the forefront. This can be achieved only through an established cooperative and transparent regulatory framework. As the Director General of WTO cited[5] “trade through value chains has helped countries access food and essential medical supplies during the crisis”, turning inwards would be a threat to the lives and livelihoods of millions as we navigate our way out of this crisis.
Further, it can fuel protectionist sentiments over the longer term. Exceptional circumstances often require innovative policy discourses and immediate responses. These initiatives are best formulated and implemented in collaboration with all the relevant stakeholders, rather than in isolation. This alone will help engender confidence in the ability of the international community to achieve sustainable trade policy outcomes.
Such an outcome could be manifested in economies mutually accepting assessment procedures and certifications, or adhering solely to the international standards of regulation. This eliminates the less significant trade requirements[6]. The European Union and the Eurasian Economic Union regional bloc have made significant strides in this regard through creating bilateral mutual recognition agreements (MRAs), regional trade agreements, and public-private forums for further coordinated actions.
Another example can be found in Africa’s response to the COVID-19 crisis. A report[7] highlights that discussions regarding the rules of origin for import of PPE-related textile commodities were undertaken as a part of meetings and negotiations for the finalisation of African Continental Free Trade Area (AfCFTA) negotiations.
Therefore, formulating cooperative and collaborative measures to simplify trade requirements is pertinent. As a foundational step, enhancing collaboration on different perspectives, establishing forums for exchange of ideas, encourage discourses and policy dialogue. Such cooperated efforts among departments, regulators and agencies will prove efficient.
[1] UNCTAD (2020). Assessing cost-effectiveness of non-tariff measures: A toolkit. UNCTAD/DITC/TAB/INF/2020/7. Assessing cost-effectiveness of non-tariff measures: A toolkit
[2] Ranney et al (2020). Critical Supply Shortages — The Need for Ventilators and Personal Protective Equipment during the Covid-19 Pandemic. The New England Journal of Medicine. https://www.nejm.org/doi/full/10.1056/NEJMp2006141
[3] OECD (2020b). COVID-19 and international trade: Issues and actions. OECD Policy Responses to Coronavirus (COVID-19). Paris. COVID-19 and international trade: Issues and actions (oecd.org)
[4] Suvannaphakdy and Kevin (2021). Why ASEAN Needs to Reduce Its Non-Tariff Measures on Agri-Food Imports. The Diplomat. https://thediplomat.com/2021/07/why-asean-needs-to-reduce-its-non-tariff-measures-on-agri-food-imports/
[5] https://www.wto.org/english/news_e/pres21_e/pr876_e.htm
[6] Fiorini M et al. (2020). COVID-19: Expanding access to essential supplies in a value chain world. Why Turning Inwards Won’t Work. VoxEU CEPR Press. London.
[7] OECD (2020c). Africa’s Response to COVID-19: What roles for trade, manufacturing and intellectual property? OECD Policy Responses to Coronavirus (COVID-19). Paris.
