Committee on SMEs and Non-Tariff barriers (NTBs)

 

Non-Tariff barriers (NTBs) refer to “quotas, import licensing systems, sanitary regulations, prohibitions” (The World Trade Organisation) and are impediments to trade, especially for Small and Medium Sized Enterprises (SMEs) (Fliess & Busquets, 2006, p. 1)

According to a OECS/APEC survey SMEs are mainly restricted in their international trade by unfavorable foreign rules and regulations, high tariff barriers and inadequate property rights protection. High costs of customs administration and restrictive health, safety and technical standards are further restrictions. The survey states that SMEs are less effected by arbitrary tariff classification and unfavorable quotas or embargos. However, the significance of certain restrictions depends on the level of internationalization and the SMEs’ market. (Fliess & Busquets, 2006, pp. 5-7). Procedural barriers to trade influence the market further through market access although being indirect and less visible.

Due to a lower productivity, SMEs are lacking economies of scale and have limited resources to access the international market in the first place (Klimek, 2015, pp. 55-56). Furthermore, financial and human resource constraints restrict SMEs caused by absent knowledge about regulatory frameworks domestically and abroad. Furthermore, SMEs are reluctant to engage in trade due to a lack of interest as they experience a biased market towards larger firms and due to a lack of advocacy expertise resulting in the inability to develop strategies. (Fliess & Busquets, 2006, p. 12)

In the General Agreement on Trade and Tariffs (GATT), the WTO has taken first steps to reduce tariff and non-tariff barriers in order to improve free trade. Agreements like the Information Technology Agreement (ITA) in 1996 aim to reduce tariffs on IT products completely (Information Technology Agreement). Nonetheless, NTBs still remained present after the agreement. Consequently, the WTO has initiated the Technical Barriers to Trade agreement which is binding for all WTO members and which entered into force on the 1st of January 1995. It “aims to ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles to trade” (Technical Barriers to Trade, p. 7). The TBT agreement is related to all products, industrial and agricultural as written in Art. 1.3 of the agreement. The TBT agreement tries to “balance between upholding legitimate regulatory policy objectives and respecting the key disciplines of multilateral trade under WTO rules, including avoiding the creation of unnecessary obstacles to international trade” (Technical Barriers to Trade, p. 11). This is significant as certain health and quality standards should be valid for all goods not depending on the country of origin or responsible enterprise.

However, the TBT agreement offers voluntary standards (for common and repeated use, guidelines for methods and production processes) and mandatory technical regulations (about product characteristics, processes or production methods as well as applicable administrative provisions Furthermore, specific conformity assessment procedures (direct or indirect procedure to determine fulfillment of technical regulations and standards) are explained. (Technical Barriers to Trade, p. 13)

The conformity assessment procedures (CAP) include procedures for sampling, testing and inspection; evaluation, verification and assurance of conformity; registration, accreditation and approval as well as their combination (TBT, Annex 1.3). It is mainly mentioned in art. 5-9 and Annex 1.3 of the agreement. The agreement further strongly encourages members to apply “relevant international standards, guides or recommendations as a basis for their regulations and standards Art. 2.4, 5.4 and Annex 3, paragraph F” (Technical Barriers to Trade, p. 20) but it is the decision of the member if the application of a standard is useful in specific cases (Technical Barriers to Trade, p. 21). Those standards are supported as technical requirements vary from market to market and trader have high costs for the adaptation and conformity assessment hindering competition and international trade which can be overcome through common standards.

The principles in the TBT Agreement are “non-discrimination, avoidance of unnecessary barriers to trade, the use of international standards, […] technical assistance and special and differential treatment for developing countries [and] transparency” (Technical Barriers to Trade, S. 15). The principles apply to the previous established categories: for example, the non-discrimination article can be found in art. 2.1 for technical regulations, art. 5.1 and 5.11 for conformity assessment procedures and in Annex 3 para. D for standards.

This committee shall discuss on the significance of NTBs for SMEs and find solutions to reduce the burden for them and ways to integrate them better in international trade. Doing so, special attention shall be given to TBTs and the TBT Agreement. A discussion about the existing principles of the TBT Agreement, the consequences of the principles for SMEs and potential changes in favor of SMEs are encouraged. The CAP shall be discussed as well, along with ideas how to involve SMEs further in the processes. The involvement of SMEs in the standard setting shall be evaluated in detail to improve SMEs ability to engage in international trade.

Besides this, debates about programs to assist SMEs to overcome information and experience barriers should be discussed along with an investigation of public consultation processes. A debate about financial aid and investment programs for SMEs will also be appreciated.

 


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Meet the Chairs

 

stephanie

Stephanie Rüegger 

jan

Jan Fergg