Technical Barriers to Trade in Goods and Service

Abstract

This piece of work gives an in depth discussion of technical barriers to trade. Aspects such as trade policy and standards will be reviewed. Over the past decade, a rise in use of technical directives as tools of industrial policy in different contexts for instance regional, unilateral, and international trade has been experienced. There has been debate on the issue of the effect of domestic regulations and standards that are observed at the borders particularly in regard to whether or not the issues should be addressed according to a trade policy and the role the World Trade Organization ought to play.

This paper gives an insight into these issues providing up-to-date information of the policy debate. A systematic approach will be adopted to allow for the understanding of barriers associated with trade and the product standards involved. This piece of work also gives the strengths and weaknesses in the model of regulatory harmonization that was initially developed as an element of internal market reform in the European Community towards the end of the 20^th century. The paper also provides a critical analysis of the role played by standards and their effects on trade.

To allow for a deeper understanding of the topic of discussion, a policy and practical research program of empirical work is developed. Firm – level surveys of technical barriers for issue in developing countries are also described. Some of the issues evident in the paper are that developing nations are deemed to incur some extra costs to meet the stipulated standards, testing, certification and labelling requirements in order to conduct business especially global trade. Many new procurement policies have emerged at different levels an aspect that could affect U.S. suppliers differently.

Statistics show that in 2009, goods trade surplus between the U.S and Australia was $ 11.6 billion showing a decline of $ 47 million when compared to 2008. In 2009, there were a total of $19.6 billion associated with U.S. goods exports. This is a decline of 11.9% as compared to the previous year. The products imported from Australia by the U.S on the other hand amounted to $8.0 billion, a decrease of 24.3%.

List of Abbreviations

• APEC – Asia Pacific Economic Cooperation
• BIS – Bank for International Settlements
• CIF – Cost-Insurance-Freight
• CLDP – Commercial Law Development Program
• EPA – United States Environmental Protection Agency
• FAS – Foreign Agricultural Service
• FOB – Free-On-Board
• FTA – Free Trade Agreement
• GSP – Generalized System of Preferences
• ISO – International Organization for Standardization
• ITA – Information Technology Products
• LDC – Least-Developed Country
• MRA – Mutual recognition agreement
• MFN – Most Favoured Nation
• NAMA- Non-agricultural Market Access
• NIST – National Institute of Standards and Technology
• NTB – Non Tariff Barriers
• NTTAA- National Technology Transfer and Advancement Act
• NDCP – Market Development Cooperator Program
• OMB – Office of Management and Budget
• OSTA – Office of Scientific and Technical Affairs
• PPM – Processes and production method
• SPS – Sanitary and Phytosanitary
• SCSC – Subcommittee on Standards and Conformance
• TBT – Technical Barriers to Trade
• TFTF – Trade Facilitation Task Force
• TPSC – Trade Policy Staff Committee
• USTR – United States Trade Representative
• USAID- U.S. Agency for International Development
• USDA – U.S. Department of Agriculture
• UCS – Commercial Service
• WTO – World Trade Organization

Introduction

The world is in a constant change and so is trade among nations. There has been great concern, among different parties on the issue of trade policy. Trade and the effects it has on different concepts such as culture, economy and society is deemed to affect people differently and can bring about political and physical confrontations.

This paper will provide different countries’ reports that show the TBT experiences. The measures and practices reported by a particular country identify important trade concerns and they may also bring about questions with respect to compliance of a trading partner with agreements related to trade where the U.S is a member. In an effort to work in an effective manner and solve issues identified in the countries’ reports, USTR aims at resolving the particular concerns through communication (bilateral or multilateral) with the trading partners involved. This brings about enhanced market access for the U.S traders. Expertises from various government agencies were consulted to come with the issues to be included in the trade policies and agreements.

The research plan was mainly aimed at helping National Institute of Standards and Technology in establishing as well as spreading information related to infrastructure and technology in an effort to sustain practices of United States companies as well as of other organizations that are connected to the U.S federal government. In this report, USTR provides relevant measures and strategies that could enhance trade among nations. Further research is underway and thus it should not be seen as if the issues omitted in this report are neglected. Instead, all issues will be treated appropriately and in the same way as the ones discussed in the paper.

Following the discussion of the resolution of the issues in the 2010 TBT Report, the issues are omitted in this section. Nonetheless, the United States is very alert and monitors the issues to make sure that they do not resurface as tribulations in the U.S industry. In addition, an evaluation of the nation’s section of the 2011 TBT report indicates that there has been an effort to resolve issues with some of them being already solved while others are in the process of being sorted out. Despite the progress, U.S. exporters are still faced with some trade concerns due to the measures adopted by other parties for instance the EU and other 17 countries as will be discussed later.

There has been concern in regard to the possible economic effects of TBT due to the fact that traditional barriers to trade have been brought down by international agreements. Despite the fact that there is an international agreement on TBT, definitions of what is involved in the barriers is still complex and hard to apply in practice. Established methodology for analyzing the economic impacts of TBTs is also lacking.

Tariffs are of different kinds. They include; a revenue tariff which is a tax imposed on a product produced internationally, a specific tariff that is expressed as certain amount per entity of import and a protective tariff that shields a local manufacturer from outside rivalry. There is also an ad valorem tariff which is stated as a fraction of the value of an import. A compound tariff on the other hand entails a combination of both an ad valorem tariff and a specific tariff.

Consumer surplus is a critical element in trade. It is the variation between the price that consumers actually pay and that which they are willing to pay. Conversely, producer surplus is the disparity between the minimum price that the seller would be willing to accept for a product and the price at which a good is sold. Gains and losses associated with consumer and producer surplus are used to measure a tariff’s welfare effect. The enforcement of a tax elevates the cost of the incoming products resulting in less trade in, a boost in government returns, a decline in end user surplus and a rise in producer surplus. The overall impact of the duty is considered as lost customer benefit.

For several years, technical experts have been involved in efforts aimed at international harmonization of standards to allow for efficiency. Some of the key bodies involved include the International Telecommunication Union, the International Electro technical Commission and the International Standardization Organization. These organizations have played a great role in trade particularly in industrial products. The ISO has for instance developed more than 9,000 worldwide standards catering for nearly all industrial elements.

Definitions

There is no distinct definition of TBTs. The WTO Agreement on TBT does not give a clear definition but instead, it offers some definition of acceptable practices and states that technical measures must be applied in an unbiased approach. The WTO recognizes the legality of the technical measures that affect trade and it has, therefore, set some rules aimed at creating and maintaining the measures. To ensure that diversity is maintained, the TBT agreement encourages members to adhere to international standards. The agreement mainly revolves around ensuring that suitable preparation, embracing, and implementation of rules and principles are followed and that pointless barriers to do business are avoided as opposed to the WTO accord on the ASPM. Although the technical barrier to trade accord does not treat science as a critical basis of establishing policy, it takes it as a significant element. There is a high level of flexibility that is associated with TBT agreement in regard to establishing the suitability and necessity of set of laws, procedures used for conformity assessment and standards. This is due to the fact that there are no exact necessities for risk evaluation as per the TBT accord. In addition, a technical barrier to trade only arises in case a certain practice does not conform to the TBT agreement for example where some form of discrimination or preventable obstacles to international trade are observed.

A technical regulation versus a standard

There exist some variation amid technical regulation and a standard. The difference is in the mode of compliance. Conformity with industrial regulations is usually obligatory whereas that of standards is voluntary. These two have varying inferences for international trade for example, non compliance of imported goods with technical regulation requirements make the goods to be banned for sale. In the event of non compliance of imported goods with the standards, the goods are allowed into the market. However, their market share could be limited in case customers are sensitive to local standards for example colour standards for clothing and textiles or quality standards for other products.

Sources of technical barriers to trade

Processes linked with planning, embracing, and implementation of different practical regulations and procedures entailed in conformity assessment are the chief sources of TBT. Producers who wish to export some products is expected to comply with the technical necessities that relate to the destination nation and meet all the monetary outcomes that are involved. The differences among countries in regard to the technical set of laws and procedures related to conformity assessment could result into trade obstacles due to issues like disparities in domestic preferences, income rates among communities and physical conditions differences. For instance, elevated rates of income per every individual within fairly wealthy nations may necessitate much demand for high-class and protected products and vice versa. Nations with regions vulnerable to tremors may encompass stern necessities for construction goods while countries facing severe atmospheric pollution tribulations may tend to enforce lesser acceptable levels of vehicle and other emissions to avoid exacerbation of the situation. Therefore, the barriers vary from country to country.

TBT provisions on technical regulations

In coming up with TBT agreements, some issues in different countries are considered. They include the differences in tastes and preference, the geographical conditions and income levels. This, therefore, dictates that there is a considerable flexibility level allowed to the members with respect to the processes of planning, embracing, and implementation of the technical rules involved. It is clearly stated in the introduction to the accord that every nation ought to be allowed to take actions that are essential in enhancing the value of its exports, or safeguard human beings, flora, and fauna life or health. A country should also not be prevented from safeguarding its environment or preventing misleading behaviours in the manner it deems to be suitable. The flexibility ensures that technical regulations do not lead to avoidable barriers to trade.

Harmonization and the Technical Barrier to Trade Agreement

The TBT agreement fosters harmony in trade practices. It persuades members to adhere to the current international standards in their practices so long as the standards do not affect fulfilment of any policy objective. The provision is offered due to the differences that exist in different countries for instance in regard to technological or geographical conditions. Just like technical set of laws, procedures related to conformity assessment should not cause preventable obstacles to global trade. As such, international guides that are provided by international bodies of standardization should be used in the national procedures for the purpose of conformity assessment apart from cases where they are not appropriate for the parties involved. Concepts such as technological and geographical problems, protection of human life and safety, protection of the environment and national security practices should be considered to allow for harmony.

Risk assessment approaches

Risk assessment approaches are crucial in measuring a subset of NTBs, particularly safety and SPS standards and regulations. This, however, requires application of scientific knowledge. The approaches enhance the process of assessing the potential protectionism and welfare effects of these kinds of NTBs. Scientific knowledge on the other hand helps in finding out whether a regulation is science-related or not and also the significance of a certain risk. It is the criteria utilized by the WTO in its evaluation of TBT and SPS regulations. The expected cost and benefits of NTBs are attained through a combination of cost-benefit calculations and risk assessment. Risk-assessment measures offer an economic means of gauging the attractiveness of an NTB and the probable protectionist nature in cases where externalities are small and costs are higher than the benefits accrued as per the desirable terms.

Due to the complexity involved in the combination of scientific knowledge and cost-benefit assessment of an NTB, it is not appropriate for large-scale multi-market analyses but rather for an evaluation of a particular case study. Limited knowledge of environmental, health, and other risks linked with trade and their economic significance is the main drawback of this approach. NTB measures are deemed to contribute greatly in the computation of effects of the NTBs. The measures are also significant in formulation of policies. Most of the WTO disputes arise where some NTBs hold back trade more than is expected for various reasons. In the formal dispute process, the NTB measures assist in estimation of export market losses and price lowering effects associated with the incriminated policy.

Non-discrimination

To avoid discrimination, the technical set of laws in the TBT Agreement stipulates that goods imported from the country of any associate be given the same treatment as that given to similar goods of national origin as well to like goods that originate from any other country. The agreement necessitates the members to make sure that they prepare, adopt and apply conformity assessment procedures in an effort to allow access of TBT agreement with regard to suppliers of similar goods that originate from the regions of other members with similar circumstances as those offered to providers of similar goods of local origin or coming from any other country, in an equivalent condition. Members are also expected to make sure that related fees are impartial. Confidentiality in regard to the information attained on conformity assessment procedures for imported goods should also be maintained just as it is the case for domestic products.

Article I: General Provisions of TBT

Definitions adopted by international standardizing bodies and within the United Nations system gives meaning to the common terms used for standardization and measures for assessment of conformity. The connotation considers the situation involved and the light of the item and rationale of the TBT accord. The meaning of the words given in Annex 1 relates as per the agreement. All products including those of agricultural and industrial nature are entitled to the terms of the accord.

Although procurement stipulations that are set by legislative agencies for their commercial or consumption needs are not entitled to the agreement’s requirements, they are looked into in the accord on Government Purchasing, depending on its inclusions. As stipulated in Annex A of the agreement on the ASPM, the provisions of the agreement do not apply to sanitary and Phytosanitary measures.

All aspects in this accord in regard to procedural rules, standards and procedures related to conformity assessment comprise all modifications involved as well as any added extras to the regulations or product elements involved. This however, excluded amendments and additions that are deemed to be of no consequence.

Annex I: Words and their meanings for the rationale of the agreement

Technical regulation

This entails a document that stipulates product features and other issues associated with it for instance processes used in their production and the administrative provisions involved for which compliance is compulsory. Apart from this, technical regulation involves evaluation of packaging, symbols and terminology as well a labelling requirements and the manner in which they relate to a product and the production method.

Standard

Just like technical regulation, a standard also deals with marking requirements, terminology, packaging and symbols in relation to their application to a procedure, product, or method of production.

Conformity assessment procedures

This entails any course of action used to establish whether the appropriate requirements of technical regulations or standards are adhered to. Among the aspects involved in conformity assessment procedures include confirmation and guarantee of compliance, authorization and endorsement, registration, testing and inspection; evaluation as well as interalia procedures for sampling and their amalgamation.

International bodies or system

This is a system with open membership to the relevant bodies of all members.

Regional bodies or system

This is a structure with open partisanship to the pertinent agencies of some (not all) members.

Central government body

It involves the government, the ministries and departments involved and whichever unit that is linked to the rule of the government. The provisions governing central government bodies apply as per the European Communities. In some cases, local bodies or conformity assessment structures may be set up within the European Communities where they become entitled to the terms of this agreement on local bodies or conformity assessment structures.

Local government body

This entails the other part of the government other than the central government. This includes municipalities, provinces and states. Ministries or departments or any body subject to the rule of such a government in respect of the activity in question is also at stake.

Non-governmental body

This entails a body distinct from a central government or a local government body. This body has lawful supremacy to put into effect a technical directive.

The Definition of International Standards in TBT

There should be a distinction between an international standard and a domestic standard. Compliance with a domestic standard is not required for access to a WTO member’s market.

The TBT agreement does not state by the name, the institutions of neither standardization nor the standards of which it recognizes, except for some indirect references to the International Standards Organization (ISO) which is headquartered in Geneva. This is as opposed to agreement on Application of Sanitary and Phytosanitary Measures. Technical Barriers to Trade agreement requires countries to adhere to international standards where applicable. The TBT agreement does not actually contain a definition of an international standard but that of the terms standard and international body in Annex I. Most of the issues involved should not be generalized but rather to be judged according to a particular case. Different legitimacy applies for international standards and thus, they are not adopted in the same manner. The adoption of standards covered by the TBT is affected by different factors for instance voting across standard-setting institutions. Controversy arises in determining whether the same status in WTO law and legitimacy should be enjoyed by all standards, despite the decision mode involved.

It is worth noting that there exist barriers to international trade originating from human intuitions. However, governments are the most important barrier-setting institutions. There are usually instances where producers endeavour to distinguish their products and fragment their markets from the rest, through concepts such as restrictive trade practices. International implications are involved. There is also the issue of globalization of industries which has led to advancement in technology and increased integration of information and products among different countries. It is at times observed that instead of reducing explicit frontier barriers, free trade agreements have concentrated on faking industrial linkages in investment, technology and information, product chains and balancing of business laws.

Tariffs on most manufactured products have been cut off radically by the main industrial countries of the world. This has been made possible through successive rounds of negotiations under the support of GATT. Over the recent past, Australia and New Zealand as well as most developing countries have changed their trade policies and are in the process of reducing the barriers involved. Various changes have been observed since 1986 with 63 countries liberalizing their trade to certain degree. Most of them, 51, are developing countries. This shows that just like Australia and New Zealand most countries have embarked on liberalization of trade.

It is observed that whereas tariffs on most manufactured goods have been coming down in developed countries, non-tariff barriers and other impediment to trade have gained greater significance and have risen in most developed countries. The Canada-US FTA, for example, was highly motivated by the need to create harmony in regions where non-tariffs barriers and regulations are imposed especially in services trade. On the other hand, The CE Single Market program deals with harmonization of internal regulation and standards. This is mainly achieved through competition between alternative regulatory regimes as well as synchronization of regulations on trade in services and products around the world.

Research shows that three different perspectives can be used in the study of economics impact of the standards on trade. They include; the literature on non-price competitiveness and trade performance where in the event that the United Kingdom’s strength in standards enhances domestic product quality there are chances of a reduction in imports and an increase in exports. The other perspective is the literature on non-tariff barriers to trade. Here, distinctive national standards are not only perceived as a barrier to imports but also as an impediment to exports. The last perspective is the literature on economic integration. Here, the availability of internationally accepted standards is deemed to enhance trade within an industry.

Formula Disclosure Requirements

As from 2010, most countries necessitated that there be a disclosure of confidential business information as a requirement for entry of products, especially food into their markets. The measures call for inclusion of the percentages for each ingredient in a product in addition to listing the ingredients. This is evident in the measures adopted in Brazil, Indonesia and Japan. In other countries such as China, Turkey, Chile, Venezuela and Argentina, the adopted measures require producers to disclose the recipe or formula linked to a product. Ecuador is also planning to adopt such a requirement.

With respect to Formula Disclosure Requirements in the United States, food containers are required to include nutritional labels listing a product’s ingredients in the order of their amounts as opposed to disclosing the specific percentages or the formula. Although some countries necessitates additional disclosures for the purpose of ensuring that quality and safety of imported food products is maintained, there exist some other food safety and quality assurance mechanisms which can achieve the same objectives interfering with proprietary formulas. U.S officials are ready to continue working bilaterally and coordinate with the TBT Committee in an attempt to protect the food industry and the proprietary business information involved. Intellectual property will be safeguarded and the trading partners offered with alternatives measures as a means of enhancing product quality and safety.

Conformity Assessment Procedures

Some of the standards within meanings of the TBT agreement include standards for procedures for sampling, testing and inspection and the voluntary standards set by European Committee for Electro Technical Standardization. These include standards for handheld computers and mobile phones. The TBT Agreement covers standards, technical regulations associated with procedures and manufacturing methods and industrial and agricultural products.

Procedures and production methods that do not influence the quality of the final product put into the market are included. There are various examples of technical regulations including the prohibition of the use of environmentally unfriendly sources of energy in the production of a product (linked with a NPR-PPM) and the prohibition to market beef from cattle fed with genetically modified fodder. There is controversy on the issue of whether the above named processes should be included in the TBT agreement.

Even after some negotiations on the issue, there was no agreement reached. Panels and the Appellate Body occasionally met to scrutinize if the measures at stake were technical regulations under the capacity of the TBT accord. In cases where pressing troubles related to the atmosphere or national security, safety, health arise, the transparency obligations that were applicable before the implementation of technical set of laws and conformity assessment actions may be avoided. In cases like this, post-facto responsibilities are made available to inform the Members of the enacted strategies. Reproduction is done and members given a chance to make comments (usually 60 days). However, the days may be reduced in cases where there are urgent problems connected with the environment or health and safety. The following are the requirements of the TBT accord that provide for derogations from the transparency requirements for standards, technical set of laws, and for conformity assessment procedures.

An example on the above statement is where a country finds out that a given packaging material is environmental unfriendly and produces deadly emissions on disposal. On banning its production and use, it is expected to notify other WTO members of the ban straight away. In addition, it should produce copies of the ban and allow for comments from all members who are covered by the regulatory measure.

Currently, TBT agreement is mainly addressed to central government bodies. However, efforts are underway to extend its application to non-governmental bodies and local government bodies. This is because they are also charged with a responsibility of establishing technical rules and principles and execution of conformity assessment measures.

Local government bodies consist of all bodies of government excluding the central government for instance provinces, municipalities and Lander. With respect to the TBT accord, non-governmental bodies are considered to be units, different from the Central government or local government bodies but having the lawful authority to put into effect a technical ruling.

Governments may carry out conformity assessment procedures with an aim of making sure that the needs they have set up in standards or rules for a product, system, procedure, individual, or body are adhered to. The procedures include sampling, testing and certification. To assure consumers that their goods or related procedures or systems meet certain conditions, suppliers make use of conformity assessment procedures.

Governments have the power to reduce difficulties involved through considering the threats linked with a product’s failure to be conventional to a fundamental standard or necessity in selecting the sort of conformity assessment procedure to utilize in regard to the standard in question. Governments may also reduce expenses related to conformity assessment through adoption of means which are aimed at facilitating the acceptance of the results of the procedures. A good example is ensuring that products are tested in the export country. The approaches that facilitate the acceptance are listed by the TBT Committee.

In the United States, NIST is directed by NTTAA in its efforts to coordinate the conformity assessment practices that are linked with the local entities, the State and Federal with regard to the technical standards conducts and conformity assessment practices of the private sector. This is aimed at eliminating whichever avoidable replication of practices. To emphasize on this legislative ruling, NIST, provided a Federal Register notice (in 2000) with details to guide Federal organizations on conformity assessment. The notice necessitates that Federal agencies offer sound basis, look for public comments, gather results from other private sector and government and institutions and more so, use global guides and standards in the process of integrating conformity assessment procedures in their regulations and purchasing procedures.

There exist various forms of conformity assessment procedures. They include accreditation, certification, registration, testing, inspection and verification. Conformity assessment bodies carry out the above named procedures. They include accreditation bodies, registration bodies and testing laboratories. For instance, testing laboratories examine products to check on their quality and performance. Bodies involved with certification check that goods be conventional to precise standards while endorsement bodies analyze the proficiency of testing and official recognition bodies to confirm whether they fulfil the expected requirements.

European Union

The European Union takes part in the establishment and implementation of conformity assessment procedures, technical rules and standards. It as well aims at supporting them sufficiently for achievement of success.

Poor infrastructure in the home market makes the entry costs in a given foreign market extremely high. Although international harmonization is deemed to contribute positively in the developing countries’ infrastructure, modern scholarship states that nothing much is achieved. The cultures and technologies of the developed nations seem to be more favoured by the international standards.

Some of the requirements of the WTO members include; providing advice on the preparation of technical regulations to the developing nation members and providing technical aid to the developing countries with respect to founding of state-run standards bodies and how to participate in the bodies’ activities. The members are also required to ensure that national standards bodies take part in advising members in developing countries. They should also give advice on setting up of bodies aimed for evaluation of conformity with standards and offer technical assistance on decided stipulations with respect to establishment of authoritarian and conformity evaluation bodies as well as assisting on the techniques through which the technical set of laws can be efficiently achieved. They should also provide technical aid to the developing country members in regard to the processes that ought to be in use by overseas producers that seek admission to conformity assessment structures managed by non-governmental and governmental bodies. They should offer other members with technical assistance associated with the organizations and officially authorized structure of global and local systems for conformity assessment adequate for fulfilment of the requirements of membership in such structures. They should provide priority to the requirements of the developing nation members and encourage organizations to recommend other members and think about request for technical support in regard to establishment of bodies that would enhance fulfilment of obligations of involvement in global and local conformity evaluation systems.

Developing countries are aiming at assuring that commitments made as a result of such assistance are adhered to. A legal and business community that is open and pleasant to the set norms is required for setting up of a highly specific rule-based system. Imposing such a system on a developing country is relatively difficult as a result of lack of institutional capacity. Supporting it could also prove ineffective in fostering growth of a sophisticated legal order.

Research shows that basic associations can be discounted. For example, in the recent past, a lot has been written in regard to the damaging effect of agricultural subsidies in the developed nations on developing countries’ agricultural markets. This is as a result of the loss of export markets and negative effects associated with inflows of subsidized agricultural products. This can be seen in the situation experienced in Latin America in which the inconsistencies in social and economic policy are evident over the past two decades.

In addition to the issue of trade liberalization, the following issues should be considered in the examination of trade and poverty lessening needs; the negotiating power in international production chains and the allocation of achievements from trade, the effect of development of non-conventional exports on sexual category relations, the relationships between trade and inequality, the impact of main commodity reliance, the connection between export and import unsteadiness and susceptibility, the balance of payments constraint on poverty reduction, the relations between trade and employment, the connection between improvement of the make of exports towards better quality and quality-skill goods and the social segregation of inferior producers from occupations and the impacts of trends in, and changeability of, the terms of trade on poverty. The fact that the list is long implies that the complex interconnected issues could be difficult to be analyzed.

Technical Barriers to Trade Issue

There are various facets of TBT. They result from the achievements of the hard work put to enhance the volume of trade and to code the regulations for its performance. There is also the issue of global trade. Medium level organizations are now in a position to carry out business operations across borders. Competition level is also relatively higher compared to the past since there is international competition in addition to local competition. All in all, trade is associated with mutual benefits to the partners.

TBT can also be seen in the view of the local pressure for governments to use measures that deal with concerns such as place of work and home wellbeing, labour protection, health and environmental preservation at a greater level that was the case in the past. Government agencies are charged with the responsibility of issuing regulations, establishing guidelines and adopting standards. They also implement measures that ensure compliance of the technical regulations and standards so as to allow for efficiency and improved public welfare.

The technical measures affect trade in different directions depending on situations. Technical measures are reasonable to be taken as correctives to alleged market failures. This is due to the fact that as opposed to other non-tariff actions that creates hindrance to trade for example quotas, technical measures are deemed to have the prospective to improve public wellbeing by offering public products that might else be unavailable.

Technical strategies also create trade. This is because they improve the flow of goods through bringing imported goods closer to be used as substitutes for domestic products. They also offer assurance to potential foreign purchasers. The enforcement of technical measures affects importers more than the exporters. For instance, the enforcement of measures relating to commercial standard fuel economy in the U.S was associated with boosting the place of Japanese exporters much as compared to local U.S. automakers. Irrespective of their mode of enactment, they have an influence on trade.

It is said that technical measures and regulations originate from research findings. Nonetheless, most regulatory bodies are operated through political processes. Technical measures have a lot to be attributed to social principles as it is to science. Different regulations, standards, and procedures for compliance are adopted by different governments due to the existence of varying local conditions and needs, differences in political processes and contradictory levels of understanding of scientific and other practical findings in different countries among other factors. However, there exist several claims stating that technical regulations are implied as wellbeing measures but are planned as tools of policy to gain hidden results are turning to be a great source of impediment to trade. This means that in addition to globally known lawful uses for endorsing technical rules, standards, and conformity procedures, there ought be other issues related to the strategies for instance, shielding domestic industries by avoiding foreign competitors in the markets through reinforcing the entry barriers. This may be taken as a way of the lessened significance and official standing of other ways to protect trade or local markets.

In ascertaining the appropriateness of a technical measure and whether it serves as stipulated by the TBT agreement necessitates the provision of adequate knowledge and statistics showing the function played by the technical measures in global trade. Proper diagnostic tools should be used to construe those facts. This will assist in protecting trade. Policy makers are left in a dilemma due to the controversy surrounding TBTs and presence of many dimensions to the issues. There is also pretty large quantity of technical information linked to every probable case of a TBT. The capital needed to solve a given issues is also relatively large.

Trade Facilitation Task Force (TFTF)

The following are the objectives of negotiations on trade in services set in the Ministerial Declaration opening the Uruguay Round. To come up with a comprehensive structure of ideologies and regulations for trade in services, including clarification of possible disciplines in each sector, to increasingly liberalize trade in services under transparent conditions as a way of intensifying such trade, to enhance financial expansion of all trading associates and reinforcing developing nations and to observe the policy objectives of national laws and regulations covering services while at the same time considering the practices of pertinent international institutions. In an attempt to come up with a draft of conformity on trade in services, a Negotiating Group on Services was set up.

Product multipacks labelling requirements

It is required that the product name that appear on the face pane of the label be alike to the one on the application and license. This may include a trademark. It is common for a registrant to use equivalent brand name for two of its registered goods. This entails registrants that dispense goods from diverse essential producers or those with more than one company number. This does not cover a registrant that schedules both an end-use label and a master label for the same good. Goods that are registered under the same EPA Reg. No. and are deemed to be the same product use the same brand name.

According to the Federal law, it is not an offence for two dissimilar registrants to use similar product brand name. As per the California system, two diverse registrants may use similar brand name as long as the goods are of the same substance make up or they do not have different material conditions adequate to interfere with their characteristics.

It is also allowed for two products registered to two different companies to share a product name provided the products are identical. A product may be used to make products for any extra uses not necessarily indicated on the MP label as long as the U.S. EPA data compliance necessities regarding the support of such use are complied with.

Products destined for manufacturing procedures cannot also have instructions for utilization as an end use good to avoid chances of confusion. Products meant for manufacturing use should never reach the public unless they are incorporated into divided products.

It is worth noting that sometimes, a MUP may be labelled for manufacturing uses and specific end uses. The products are usually in the category of industrial-use products and hence could be turned into either end-use products or used with other materials to come up with other products for example wood preservatives.

Where there is the use of a labelling that includes instructions such as uses and directions of use differing from those indicated for end-user able, this is called supplemental labelling. It entails partial labels that are distributed discretely from the container label. The partial labels should have a statement that refers the user to the product label for absolute guidelines and indicating the labelling have to be in the custody of the user. To safely and effectively use a product, the product label and the supplemental labelling ought to be presented to the consumer.

Transparency

Transparency is a critical element in TBT agreement. It entails the process of making public, different issues such as the terms of creation and use of technical set of laws, conformity assessment procedures and standards. The public is also given a chance to comment on proposed technical regulations, standards and conformity assessment procedures. The WTO accord stipulates the transparency obligations. There should be a record of a prior-implementation notice before the endorsement of a measure in an attempt to acquaint concerned units with what is entailed in the proposed measure.

It is expected that preceding the endorsement of a technical directive or a conformity assessment procedure; other members should be informed of it through the WTO secretariat, indicating the goods to be involved and the implications of the technical regulation or procedure. In case of a draft standard, there should be a 60-day provision for comments by members. Copies of draft technical rules, standards and conformity assessment procedures ought to be provided to the associates when needed.

Comments gathered from members in regard to the proposed measures should be considered before the enactment of the measures.

Article 10 of the TBT agreement requires members to set up enquiry point from which to respond to realistic inquisitions from and offer records to members and other concerned parties regarding technical rules, standards and conformity assessment procedures. Enquiry spots also provide certain information associated with non-governmental standardization organizations’ processes.

Transparency is extremely crucial in the TBT agreement. For this reason, the transparency obligations are present before the formation of technical rules, procedures of conformity assessment and standards and remain all through to the implementation and maintenance of the measures. For transparency reasons, a member who seeks to endorse a law affecting a certain practice is required to offer drafts of the measure to other members, allow comments from them, make public the measure and inform members of the measure prior to endorsement of the law.

After the enactment of the law, the member is expected to offer information and relevant documents concerning the law to any interested party upon request. All these efforts are meant at enhancing transparency, openness and accountability in the regulatory process and thus in turn, ensure that the United States adheres to the central TBT agreement and U.S. FTA obligations.

Members are required by the agreement to issue a notice early enough and inform other members through the WTO Secretariat in case they intend to observe a technical regulation or conformity assessment procedure and to include the rationale of the projected measure in the notification as a way of ensuring for transparency. However, these obligations stand where there is absence of a pertinent global standard, directive, or suggestion or where the practical substance of a projected technical rule or conformity assessment method does not conform to the details of pertinent global standards, directive s, or suggestion s. In case of the above conditions, a member have to allow adequate time for other members to comment on the planned set of laws or measures.

The TBT Committee recommends a minimum of 60 days. The comments received from members should be incorporated in the measures to be enacted. The agreement stipulates a Code of Good Practice which applies to chosen standards. The code requires members and bodies of standardization to publish a work plan after every six months. The program should contain the standards being prepared. The draft should be made available to interested parties for comments after which it should be published. All technical rules and conformity assessment procedures should also be made available without delay. Besides, every member should set an inquiry point to help respond to questions asked. Documents concerning technical set of laws, procedures of conformity assessment and standards adopted or projected within a member’s region should be provided.

According to transparency proposals, regulators in different parts of the world ought to base their regulations on comparable data and reach similar conclusions concerning the risks linked with a specific product and the suitable strategies to alleviate the threats. The proposals also persuade regulators to develop and adopt appropriate regulatory measures. This is in return deemed to help producers boost their exports and trade in different markets world wide.

In an effort to attain the goals related to transparency, the proposals associated with textile, autos and electronic have provisions that oblige WTO Members to inform the TBT Committee of the technical rules and procedures of conformity assessment they intend to develop, irrespective of whether these strategies are based on international standards. This helps to reinforce the existing TBT agreement obligations thus ensuring that all the parties involved are well informed about the proposed regulations which may interfere with their capability to export in different markets. With these amendments, the proposals would offer a better chance than what is currently offered under WTO rules particularly in regard to commenting on proposed regulations prior to adoption.

Regulation measures as goods and trade barriers

As a way of doing away with pointless barriers to trade and deal with particular trade issues that are experienced as a result of measures related to standards, the U.S upholds a comprehensive and dynamic programme of commitment with overseas governments. The TBT Committee remains to be the most important bilateral medium for commitment on trade concerns linked with measures related to standards. Another crucial element in reinforcing the U.S. efforts towards solving trade problems is the cooperation of the measures in the U.S FTAs. Other strategies that are adopted by the U.S. agencies in an effort to prevent potential technical barriers include; information exchanges, negotiations on specific agreements, engaging in all-party, local, and bilateral supportive practices and technical support. The above named efforts are adopted to aid other governments in designing effective and appropriate measures related to standards in order to achieve enhanced regulatory results that facilitate trade in turn.

The cooperative efforts assumed by the U.S. government together with information exchanges with developing countries play a great role in assisting companies in the countries involved reinforce their capability to fulfil the foreign measures related to standards. Developing nation manufacturers require a superior understanding of overseas technical needs and approaches to constantly maintain those needs particularly as they increase their participation in global supply chains. In order to achieve maximum cooperation and have effective information exchange initiatives that effectively meet the set objectives, there is a need to have close synchronization among standards, authoritarian and trade officials who have extremely specialized practical know-how.

The U.S. Agency for International Development (USAID) is used as a medium through which the United States provides capacity building and bilateral technical assistance to the developing countries in regard to activities related to standards. Other agencies that are deemed to be incredibly significant in the provision of technical assistance on standards particularly on food trade include; Market Development Cooperator Program (NDCP), NIST, Trade and Development Agency (USTDA), USDA’s FAS and the Commerce Department’s Commercial Law Development Program (CLDP). The agencies are founded on broader missions and they offer capacity building assistance related to standards as a capacity building support as a constituent of a given venture.

The United States negotiates mutual, local, and multilateral MRAs with U.S. trading partners in an effort to minimize the negative effects on trade emanating from variances in technical requirements across markets. The United States as well concludes equality provisions with other governments in order to minimize foreign technical barriers.

A recent example in regard to this issue is the swap of equivalency determinations between Canada’s Food Inspection Agency and USDA on organic agricultural produce in June 2009. The result of this exchange is that now, the U.S. National Organic Program standards need not be sanctioned through the Canada’s National Organic Standard for the sake of marketing their products in Canada. As a way of equality, Canadian producers should receive the same treatment for their exports in the United States as per the exchange. There is a probability of impediment of trade for different industrial products and systems due to the threat of an increasing number of products for commercial use being produced with cryptographic qualities as a way of safeguarding data confidentiality and integrity.

Some domestic technologies are required in an effort to make possible the execution of these measures. The technologies may, however, not provide for the best protection and may thus result in forced transfer of intellectual property. The measures may also influence innovation negatively and thus slow down trade.

To avoid a repeat of the same in future, the United States is in the process of resolving the market access problems through collaborating with the trading partners. To reinforce the measures, the U.S officials are to undertake various processes for instance encouraging the use of pertinent global standards as a foundation for regulation, fostering non-discrimination, and ensuring transparency in the development and implementation of measures regarding goods with cryptographic capabilities. Other opportunities that entail collaboration with trading partners in an effort to avoid the spread of problematic behaviour are also to be discovered. TPP negotiations are for example deemed crucial.

Economic effects of trade preference

There should be avoidance of any kind of discrimination in trade. Any kind of discrimination in favour of a party, no matter the extent, is a way of discriminating against all other parties. It may even lead to loss of export demand on the side of those being discriminated against. For this reason, it is advisable that specific trade patterns are examined to cater for the needs of all parties involved.

Trade Facilitation Task Force (TFTF)

A call for an APEC medium to enhance information exchange and cooperation as a way of minimizing the potentially unfavourable trade effect on APEC financial systems from the rising technical needs was identified due to the propagation and diversity of environmental regulations related to products more especially those associated with the European Union. The Trade Facilitation Task Force (TFTF) was established in 2006 by the SCSC for the purpose of engaging business and technical specialists in swap of knowledge on various trade issues associated with APEC financial systems irrespective of their origins. TFTF also enhances collaboration in international standardization activities linked with environmental regulations that are product-specific. TFTF activities involve various experts for instance those from academia, industry, regional and international bodies among others.

A TFTF meeting was held in Japan in September 2010 where information was exchanged and cooperation in regard to trade and technical issues enhanced. Much focus was given to work associated with carbon emission estimation and sustainability.

Preferential trade agreement has been deemed to enhance trade through increased economic activity. It covers merchandise trade as well as services. Increased real income of participants as a result of preferential trade agreement could result in high demand for products of outsiders thus promoting their real income and terms of trade. Comparative advantage may also change with time.

The expectations of higher income and growth in member countries or to ensure access to those markets may result in an increase in investment in preferential trading blocs. This in turn may result in a diversion of investment, away from outsiders despite the fact that higher returns may be achieved by the exporting outsiders. Change in trade patterns induced by preferential agreement and by the economies of scale brought about by such agreements may affect not only the investment location but also the industry location.

There are different perspectives trade agreements. There could for example be free trading area that involves free trade and is open to new members and has common agreement covering all the members. This type of agreement complements and stimulates liberal, multilateral trade. The other option is an agreement which is limited in its product coverage, is hostile to outsiders and admits new members despite having different rules for different countries. This type of agreement undermines liberal and multilateral trade.

U.S. Processes for Identifying Standards-Related Trade Barriers and Determining How to Address Them

The United States is in a move to deal with all forms of barriers to trade. It, therefore, maintains thorough processes and mechanisms aimed at identifying, assessing, examining, and dealing with foreign government measures related to standards and which in one way or the other may impede the U.S. trade.

Standards-related issues play a great role in shaping domestic as well as global trade. For these reasons, strategic measures ought to be taken to ensure that trade is not affected negatively. Following this, the TPSC Subcommittee which is made up of centralized authoritarian agencies and other organizations’ representatives all having a concern in overseas standards-related strategies is entitled to meet not less than three times a year. In addition, it is expected to uphold a process in progress regarding informal consultation and organization on all standards-related concerns as they crop up. The members of the Subcommittee include administrators from various divisions (Commerce, State and Agriculture) and administrators from OMB and federal authoritarian bodies. The sectors of Agriculture and Commerce play a great role of passing information between U.S. industry and agriculture export interests and the TPSC Subcommittee.

Much data in regard to trade and standards is generated by different bodies and made known to the relevant parties. Some of the bodies involved include the Commercial Service , USTR, Foreign Agricultural Service and its Office of Scientific and Technical Affairs and the State Department’s economic officers in U.S embassies overseas.

As a way of gathering adequate information, the WTO TBT Inquiry Point and Notification Authority made and distributed over 45,000 information requests, with over 2,500 requests being for information on standards and over 43,000 requests related to technical barriers to trade. In addition, the office issued 112 United States government and industry remarks to other WTO associates, and disseminated 43 WTO member remarks on U.S. strategies, as well as 35 WTO member responses to U.S. comments, to pertinent centralized bodies.

The announcements of latest or revised strategies of other WTO members in areas of concern are monitored using the program called Notify U.S. early alert and contact U.S. officials to get more information. The information assists in giving in of U.S. remarks and coordinates later activities. Point and Notification Authority also undertakes training programs for parties that may be interested in understanding of the operations of a WTO inquiry point.

Committee on Technical Barriers to Trade

This committee involves representing units of each of the WTO members. It should meet once a year or when need arises. The TBT committee is charged with a variety of responsibilities including the following. Carrying out all the tasks assigned to it by the members and establishing operational agencies and other bodies to perform the tasks, avoiding replication amid its actions and the work of governments in other technical agencies and provision of a chance to confer with TBT concerns to all members. The TBT committee is necessitated to evaluate the execution and functioning of the TBT accord each year considering its goals and objectives.

The following factors should be considered by the committee in granting such an exception; the particular expansion and trade requirements of the developing nation member, the phase of industrial advancement of the particular developing nation and the particular tribulations experienced by developing nations in the preparation and application of technical set of laws, standards and procedures of conformity assessment. The different problems encountered by the least developed country members should be considered in carrying out the activities of the TBT committee.

The TBT committee is required to appraise the implementation and operation of the TBT accord after a period of three years in an effort to recommend amendments of the rights and obligations of the agreement appropriately. The review serves the purpose of allowing for a reciprocated economic benefit and balance of privileges and commitments. Special and differential treatment should be provided without prejudice.

Issues Related to Trade in Halal Products

Muslim products are a special unit of trade. There is a growing population of the Muslim community in the United States and thus an increased demand for Halal products and other Islamic related services like banking. Malaysian companies ought to benefit from this. An agreement on Halal certification standards and procedures would, therefore, be significant in regard to exports from Malaysia companies to the U.S. and also for the United States companies that may produce products and services targeting Muslim customers in Malaysia.

Malaysia aims at becoming a global centre for Halal products, that is, products that are officially endorsed for use by Muslim consumers. The certification and requirements for the Halal products would be similar to those imposed for kosher products meant for Jewish consumers.

AMCHAM and the U.S. Chamber have been involved in strategies aimed at assisting Malaysian government’s initiative to develop the country as a centre for Halal products with the believe that the step will create bilateral business opportunities with the growing Muslim population in the United States. There has been much controversy associated with the concept of the Halal labelling system and other standards requirements, an aspect that has led to heavy penalties on foreign companies as they fail to go as per the set government policies.

Halal Logos

It is a requirement that Halal products produced outside of Malaysia be certified by a JAKIM-equivalent body in the producer country. JAKIM is the Malaysian government agency that certifies the Halal. Products produced outside Malaysia should have their country of origin certification logo prior to importation into Malaysia.

A logo can also be used for different states in Malaysia for Halal products produced and distributed within the same state. For products distributed in different states, a federal JAKIM logo is used having the same design as an individual state logo but showing it is certified by the federal.

However, according to AMCHAM, there should only be a single Halal logo for all transactions in Malaysia to avoid confusion and authenticity problems that could be brought about by using a combination of the 13 state-specific logos and the federal logo. To avoid many instances of fake logos, ministries and agencies involved in the Halal certification process should have a clear reporting authority.

Halal and Haram concept

There has been a lot of debate in regard to Halal concept particularly for Halal meat, Halal food and Halal non-foodstuff among Islamic countries. Awareness programs and campaigns have also been developed to enlighten people on Islamic issues. Non-Islamic countries in the United States of America, Europe and Asia are targeted to avoid any form of confusion regarding issues surrounding Muslim markets. Currently, the concept of Halal is understood internationally and producers are now capable of expanding their export trade into the international market with ease.

Certification vis-à-vis Other Countries

Compared to other countries, Malaysia holds the strictest Halal certification policies in the world. AMCHAM and the U.S. Chamber support ensure that the Malaysia’s requirements on Halal products are relatively the same as internationally-accepted Halal standards. The Malaysia’s policies are also made in such a way that they are not extremely restrictive to an extent of making it more difficult for goods from abroad to enter the market especially where their own countries’ Islamic Halal-certification bodies have certified them.

Haram means prohibited and it is, therefore, the opposite of Halal. Although Haram and Halal are commonly used among Islamic communities, they are mostly associated with personal care products, food contact materials, meat products, food products, appearance items and cosmetics. Some Islamic laws define food to be either Halal or Haram representing foods that are permitted and those that are prohibited respectively. Generally, Muslims are prohibited from consuming pork and alcohol since they are considered to be unclean and, therefore, Haram. It is also a common practice for Muslims to ensure that they consume meat products that are certified and considered to be Halal. Only certified slaughterhouses that follow Islamic slaughter practices ought to be trusted by the Islamic communities.

Barriers to trade in Services

Just like the product industry, the service industry is faced with some barriers to trade. This necessitates a commercial presence when providing services in another country. There is a close relationship between liberalization of trade in services and the liberalization of foreign direct investment. Services are traded across borders through various means for instance through movement of people from one country to another. Barriers to trade in services could, therefore, be experienced when immigration restrictions are imposed, preventing temporary entry. Certification requirements and restrictive licensing also form barriers to trade in services. Another way through which services could be traded is through the movement of data and money across borders for example accounting and insurance. In regard to this means, barriers to trade in services may result from regulation or restriction of trans-boundary data flaws exchange and capital movement controls and exchange and capital movement controls. Trade in services could also happen through access of the provider and consumer to a network that could either have a domestic or international coverage. Here, barriers to trade in services could originate from the interconnection terms involved.

Most barriers to service trade are associate with fundamental domestic regulatory choices like regulated monopoly versus competition in a given sector. Quality regulation also contributes to the barriers in service trade. This could include training and certification of professionals’ requirements that allow for limited recognition of foreign credentials although with no direct discrimination based on the nationality of the provider and the origin of the training.

The argument for free trade internationally is perceived by many advocates of liberalization of trade in services to be associated with alleged benefit of deregulation in a domestic context. The issue of whether strict or liberal regulation maximizes domestic welfare is controversial and depends on the judgments of the costs and benefit of a particular regulatory approach and about market conditions in regard to the risk inclinations of the citizens. There are basic observations that could be deduced from the insight. The global gains from liberalization of trade in services should be detached from gains or losses to domestic welfare which may be enabled by the regulatory changes needed to a stand to uphold liberalization.

The other observation is that free trade in services may lead to overflows that distort the global allocation of resources in the absence of a high but level playing field. A good example is where lax regulation of a bank in country A may lead to failure of financial institutions or prejudice to depositors in country B which has placed large deposits in the bank. The consequence is that considerable costs will be incurred by the public authorities in country B. Free trade in services allows countries to effectively carry out business across border. However, in the lack of agreed minimum authoritarian standards, liberalized trade could lead to a net reduction in aggregate international economic wellbeing. This indicates that achievements accrued from free trade are fewer than losses especially when viewed in terms of reduction in global welfare as a result of opportunities created by liberalization as a form of externalizing the costs of domestic regulatory approaches abroad.

Currently, the world’s leading financial powers have embraced guidelines for capital adequacy of banks under their regulatory control. However, the guidelines are considered to be insufficient. For instance, the Asian crisis indicated that there is still much that need to be done to make the situation better. Some of the notable issues include the fact that cooperation among domestic securities regulators has become increasingly successful in containing contagion effects where instability or regulatory failure in one market undermines market confidence in other areas. It is also clear that as markets in service sectors become increasingly globalized, integration mechanisms have been adopted in an effort to manage regulatory overflows.

Standards-Related Measures

Much about this sector has been discussed earlier under the subtopic; Regulation Measures as goods and trade barriers. U.S agencies aim at preventing potential technical barriers from emerging through various strategies for instance engaging in negotiations on specific agreements, negotiations on specific agreements, and engaging in all-party, local, and bilateral cooperative actions. To successfully meet the objectives of the technical barriers to trade agreement, there is a need for close coordination among all the parties involved. MRAs with trading associates that have a authoritarian approach well-suited with that of the U.S with a comparable level of technical capability can greatly assist in fostering business in some sectors with significant trade flows but faced with complex technical requirements. A good example is the telecommunication equipment sector. Much detail on the U.S. commitment on standards-related strategies in various worldwide and local areas is discussed later in details. U.S. mutual commitment with its trading associates on standards-related strategies is detailed in individual Reports that are Country Specific.

Doha Round Negotiations Regarding Standards-Related Measures

Three proposals have been tabled in the WTO’s Doha Round of Trade Negotiations on Non-Agricultural Market Access (NAMA) by the United States. This effort is meant to minimize non-tariff barriers (NTBs) related to standards. The following are the areas covered by these three proposals.

‘I. textiles, apparel, footwear, and travel goods (TAFT); 35, II. Electronic goods; 36 and III. Automotive goods; 37’. All the three proposals have been set, by the WTO senior officials, for main concern negotiations as a unit of the overall NAMA NTB negotiations.

The three proposals play great roles individually and thus they contribute to overall trade efficiency. Each proposal aims at facilitating trade in a specific sector in which U.S. industry has shown some concern in regard to NTBs related to standards. The TAFT proposal for example was adopted due to a growing concern by the U.S industry in regard to differing approaches that are usually taken by WTO members concerning labelling requirements. Rapid changes in those requirements are deemed to have the potential of imposing considerable expenses and troubles on manufacturers and at the same point increasing the time taken to bring the products into the market. The costs are usually carried on to the importers and customers. The three U.S plans aim at enhancing trade through reinforcing the TBT agreement principles. The proposals also develop new and enhanced regulations in quarters like international standards, good authoritarian exercise, transparency, and conformity assessment processes. The three policies also ensure that the involved regulators are in a position to meet legitimate policy objectives at all times.

Last year, all the above named U.S. proposals were discussed in detail among WTO members. The most significant progress was however experienced on the U.S. textiles proposal as well as the transparency provisions that are usually common to all three proposals. To facilitate greater discussions on these initiatives among the WTO members with the most substantial interest in the respective subject matter, small groups were created by the negotiations’ chairperson. These groups did not end there but rather, the United States is actively involved in the activities of these groups with the main aim being the attainment of a consensus. In addition, the United States use the small groups as a means through which the autos and electronics proposals can be advocated.

Tariffs

As earlier noted, tariffs are crucial elements in the business world. They are associated with both positive as well as negative contributions towards trade. Tariffs are related to certain economic characteristics which in one way or the other contrast with other policy instruments that could be used by the government in an effort to protect domestic industries. The use of quantitative restrictions or quotas could be used to by the government in an importing country to protect domestic industries. This measure works through limiting the volume of imports to be permitted thus assuring the domestic producers of a safeguarded market share. On the negative side, this measure may insulate domestic producers most forms of foreign competition. This in turn lowers the rate of production and profitability.

In case of non-prohibitive tariff, competent foreign producers could be in a position to get through the tariff and compete effectively with domestic producers hence creating some incentives for the domestic producers to improve on their productive efficiency. There exist another difference between tariffs and quotas with respect to the party that collects the scarcity rents that they produce. With respect to tariffs, governments in importing countries collect revenues from non-prohibitive tariffs while with the quotas domestic holders of import quotas or licenses are entitled to collect scarcity rents depending on the allocation of the quotas. For example, in cases where the quotas are allocated to foreign exporters, these companies are supposed to collect scarcity rents by charging more for their products in the protected market. They will as well not be required to pay customs duties on the imports.

There are usually instances of confusion between tariffs and production subsidies which are mainly meant to artificially enhance the competitiveness of domestic industries in regard to imports. Tariffs and production subsidies are quite different in their implementation and the consequences they have on different components of a given market. Production subsidies work by distorting domestic production decisions through the attraction of resources into the subsidized activity without having to distort domestic consumption decisions thus enabling the products involved to trade at world prices. On the other hand, tariffs work by distorting both the domestic production and consumption decisions. This is achieved through attraction of resources into protected sectors as well as raising prices to consumers above world prices. This implies leas- cost ways of production that results in allocation of resources to forms of consumption that are less desirable to the consumers.

Prior to the Kennedy Round (1964-67), tariffs related issues were negotiated on a product-by-product basis. This was in the five negotiating rounds under the GATT. The Principal Supplier rule that was adopted by participants stipulated that to seek tariff dispensations from importing countries, countries that were principal suppliers of goods into international markets would be required to prepare request lists of the goods involved. In addition to preparation of the request list, the countries would as well prepare offer lists with adequate information on the products on which they were prepared to make concession. Following the Most Favoured Nation (MFN) principle, requests and offers were normally directed by principal suppliers to principal importers. This led to presentation of tariff negotiations in a bilateral manner. A supplier could not have some interests in directing a request to a minor importer. This is because there would not be such obligation based on trade concessions negotiated with such a country particularly with respect to MFN obligations on a minor importer.

Another notable concept is that Product-by-Product negotiations are deemed extremely crucial since they can achieve relatively high internalization rates. This is as a result of the confinement of the benefits of trade concessions with little or no free-riding on especially with respect to exporters with no reciprocal concessions to offer. Following this situation, there was a settling-up session where concessions previously negotiated were subject to threats of withdrawal since there was a high probability of overflows benefiting non-reciprocation. There was a problem of ascertaining whether the non-reciprocating countries would also agree to offer concessions and thus the controversy.

The process resulted in extreme tariff cuts on items that were subject to negotiations. However, it perhaps largely restricted the range of products with respect to which active negotiations occurred resulting to reductions in tariff. There were various limitations that were associated with Product-by-product negotiations. For instance, it led to freezing out of exporting and importing countries from the negotiation process. Consequently, domestic producer constituencies were encouraged to become active in resisting tariff concessions on products in which they were interested through focusing negotiations on particular products. Another limitation is linked with focus on line-time negotiations which is pretty expensive in regard to the processes involved.

After extensive negotiations among various responsible parties, formulae were finally agreed to. The formulae necessitated that in either case, there exist larger cuts of higher tariffs than of lower tariffs. There was a limitation associated with this approach. Countries were more likely to abuse the right to take items out from the linear-cutting formula and place them on an extravagant exceptions list. This would in turn make them to be subject to product-by-product negotiations only. This experience was highly adopted by many countries with import-sensitive sectors for example footwear, textiles and clothing. The product-by-product negotiations were considered to be more advantageous than linear-cuts and thus desired by many countries and companies.

The countries that largely depend on exportation of agricultural products or natural resources like Canada were attracted by product-by-product negotiations as opposed to linear-cuts due to high protection of the manufacturing sectors despite the fact that the tariffs were a bit low. Kennedy round and Tokyo round presented varying conditions for instance the linear –cutting was done away with in the Kennedy round as opposed to the Tokyo round. In spite of the problems that were brought about by the differences between linear-cuts and product-by-product negotiated tariff reductions, there was a substantial decline in the standard level of tariffs as a result of negotiations in the Kennedy round and Tokyo round.

Both Kennedy and Tokyo Rounds involved efforts made to negotiate reductions in trade barriers in selected sectors for example forest products, minerals and chemicals. Among countries that greatly embraced this approach is Canada. However, the approach led to great failure due to various reasons. For example, focusing negotiations on specific sectors is deemed to have an impact of engaging the producer interest in the sectors as opposed to minimizing or avoiding trade restrictions. There is also a problem connected to reaching to an agreement. This is because negotiation among producer interests in the same sector in different countries is attributed to contribute no benefits to them. A good example of a protectionist scenario is the negotiation of code on trade in civil aircraft and components. This is despite the fact that there was success in the process and some barriers to trade were minimized. In a similar case, the agriculture agreement negotiations made during the Uruguay Round resulted in liberalized trade in agriculture. In the event of attempting to negotiate trade liberalization within sectors, there was a dramatic reduction in the political room for dealing with cross product exchanges. This is as stipulated in the product-by-product or linear-cutting negotiations.

Developing countries are exempted from offering reciprocal commitments in trade negotiations. The developed countries on the other hand are required to give high priority to lessening of obstacles to goods of specific export concern to developing nations to highest level possible. Following the provisions, most industrialized countries adopted the Generalized System of Preferences (GSP) towards the end of the 20^th century. This led to unilateral extension of preferential tariff rates on specific items of export interest to developing countries. The preferential tariffs were usually not bound but entailed escape clause provisions that allow for a high rate of flexibility for instance permitting the termination or reduction of the preferences where need be, like when there are import surges. Graduation provisions also occur where developing countries lose their preferences. At such a time, the country extending them assumes that they have reached a state of development where they no longer require any form of assistance.

Items produced by politically sensitive domestic sectors are not entitled to GSP preferences. These include footwear, clothing and textiles despite the fact that the sectors are of great export interest to a majority of developing countries particularly with respect to industrialization. Another crucial observation is that due to a decline that has been experienced in MFN rates following subsequent multilateral negotiations, there has been a contraction in the margin of preference between GSP and MFN rates.

Tariff negotiations under the GATT since the Second World War have not been without some notable effects in the market. For example it is through the negotiations that a reduction in the world tariffs was experienced radically. There was a fall of approximately 35% on manufactured goods. Substantial tariffs on particular products were still maintained by many countries despite the low average tariffs. Other problems could still be observed for instance imposition of uneven tariff levels on particular items among different industrialized countries. This therefore called for strategic measure to be taken to streamline the law.

Most GSP tariffs and tariffs in many developing countries were still not legally bound. Varying and unpleasant impacts were experienced in association with specific tariffs on developing countries’ exports as could be seen in fixed charge per unit of product involved as opposed to a percentage of value. Some form of discrimination was also observed in the operation of the cost-insurance-freight (CIF) as opposed to free-on-board (FOB) procedures for customs valuation. The developing countries that were considered to be geographically disadvantaged were discriminated against, an aspect that is not desirable. Another critical issue in regard to tariffs is on liberalization of tariffs that cover products which are usually under other non-tariff barriers for example quotas. It was also a common practice among the developed countries to apply increasing tariffs to imports that develop on their different processing stages as a way of protecting domestic processing industries. This is however at the expense of developing countries that in the real sense are supposed to accrue significant benefits as a result of being in a position to be involved in value-added processing of the raw materials exports.

In regard to the Uruguay Round tariff negotiations; the contracting parties were given the freedom to apply for their desired mode of reducing tariffs as long as the reduction was considered to be relatively equivalent to the overall reduction that was achieved in the Tokyo Round which is approximately a third of the current duties. Here, Substantial reductions were attained. Tariffs reductions on industrial products were approximately 40% as per the trade-weighted ad valorem. The implementation of the results of the negotiations is attributed to considerable positive contributions in regard to imposition of tariffs. Positive move entails some progress on reduction of the increasing tariffs on processed products. Developed countries’ tariffs on industrial products fell greatly from 6.3% to 3.8% on average in 1947. Another change is on the developed economies’ tariffs in regard to industrial products, a fall from 99% to 78%. The bound tariffs with respect to developing countries now stand at 73% compared to 21% before the round.

Despite the overall improvement, there are still cases where high tariffs in different categories for instance rubber, fish and fish products, footwear and travel goods; transport equipment, textiles, leather and clothing among others. The tariff rates that are imposed for the textiles and clothing industry is for example still high ranging between 15% and 35%. With respect to agricultural products, the terms are a bit different. It is required that the quantitative restrictions be converted into tariff equivalents and lowered by an equivalent of 36% after every six years for the developed countries. The minimum reduction that is made for each tariffs line should be 15%.

Information technology products are also not left out. Currently, the Information Technology Products (ITA) has around 60 parties. This is a relatively high number that represents over 95% of world trade related to information technology products. The ITA plays a great role in IT trade. It offers for division of tariff cuts which is usually done in equal rates reductions, that is four times each 25%. This was witnessed for three years, 19997-2000. With the ITA there is elimination of other charges and duties upon the IT products. However this provision was not supposed to stand past 2005. Although at the moment the ITA does not cover consumer electronic goods, plans to extend the coverage of the Agreement are in progress.

Doha Round Tariff negotiations

There is great improvement in regard to tariffs as a result of the negotiations that have taken place. In the industrialized countries, the Post-Uruguay Round tariffs are relatively low with little or no non-tariff border barriers. The situation is, however, different when it comes to the developing countries. There are still high tariffs in most of the areas where the developing countries export for instance in textiles. Statistics show that in case the post-Uruguay Round tariffs and other obstacles on agricultural and industrial goods were reduced to 67% in the Doha Round, there would be a rise in the world’s wellbeing by approximately $686.4 billion. This is an amount that constitutes a combination of other welfare gains for instance $132.6 billion to Japan, $227 billion to the EU/EFTA and $164 billion to the United States.

The Doha Declaration serves a great purpose in trade. It deals with tariff reductions in it jurisdictions in a direct manner. The declaration accepts trade and environment related negotiations particularly with respect to the reduction or abolition of tariff and non-tariff obstacles to ecological goods and services. According to the Doha declaration, members should commit to discussions that are aimed at eliminating tariff and non-tariff barriers. Much focus should be on products that are deemed crucial to developing countries especially when perceived with respect to market access for non-agricultural products. Although there may be some form of flexibility in the trade practices, there are still some conditions to be fulfilled. The flexibility terms for developing nations will be in the form of exceptions to full reciprocity in reduction commitments. The modalities for negotiations ought to entail lessons and capacity building strategies in an effort to enhance increased and appropriate participation of developing nations in the debates.

The national defence argument is taken as the common argument for tariffs. Countries are obliged to take actions that are aimed at ensuring their military forces have got all it takes to operate in an effective manner. The military forces are faced with a variety of challenges that may necessitate provision of a wide range of products and services that could even not have been planned, for instance in the event of emergencies. The argument that could be deduced from this case is some industries are usually at high risks and there is therefore a need to be alert and stay protected from foreign competition. This is a positive move that ensures that there is always a sufficient output from the industry even in the event of any form of conflict. Although the argument is considered to be appropriate, it is associated with two major problems. There is no clear definition of the industries that ought to be considered to qualify for national defence. Due to the uncertainty, only those industries that have a weak relation to national defence could be considered for protection. There is a wide range of protection under the national defence argument. The protection could be in the form of non-tariff barriers to trade or tariffs. ¹⁴³ The other major problem associated with the argument entails the fact that a tariff is an expensive means of achieving the result. The optimal policy in this case can therefore be taken as a form of production subsidy.

The main aim of protecting the industries is to offer a means of distributing resources from the industries in an appropriate manner that allows for maximum level of output to avoid a fall down in the economy. To support this argument, it is believed that in case a firm in a given industry fails and the resources accrued to it are not useful in any way, there is a high possibility of a fall in the overall output of the economy even if it could not be an immediate effect. According to the argument, there is likelihood that the output form older industries could be increased through temporary protection especially if the protection is withdrawn in a gradual mode at the stage where the resources of the industries reach end of their useful life. This argument is reasonable and is linked with picking future comparative advantage industries, an aspect that is absent in the infant industry argument. Some of the characteristic of comparative disadvantage industries include a fall in profits, a rise in the levels of imports, a fall in employment in the industry and a down fall in the firms due to poor performance among others. Industries ought to be protected to the best way possible. However, the protection should be temporary to allow for withdrawal when the assets in the industry depreciate as they progress towards the end of their useful lives in economic perspective. This process is however not easy to execute and necessitates strategic decision making. This is because the protectionism is supposed to be withdrawn at an appropriate rate and time to avoid instances of making a mistake of a lifetime where the country could be permanently overburdened by an old industry that is inefficient. A good example that could be given in this case is the agricultural sector of many developed countries.

The other argument that is linked with tariffs is in regard to creation of jobs in the economy. The argument also seems reasonable at the face. A tariff is deemed to increase the output of the domestic industry and as the output heightens, it is believed that the employment rate in the industry increases considerably. However, when this argument is looked at in a critical manner, the creation of jobs as a result of the tariffs is questionable. It is even argued that even with many tariffs being imposed on imports, the number of jobs could even be less than in the absence of the tariffs.

Although tariffs could create some jobs in some industries, they may not have an effect in other industries. This could be accrued to the fact that consumers usually use more money on products from the protected industry and fewer on other products. This therefore dictates that tariffs could only have an impact of rearranging the existing jobs as opposed to increasing the number of the jobs. In reality, protected industries usually have more jobs than the others and thus the overall level of employment has barely changed. There are other significant factors that determine the rate of employment other than the effects of tariffs on industries. They include the macroeconomic forces for example the condition of the prevailing fiscal and monetary policy and the long-run rate of economic growth.

Non-Tariffs

There are many gaps that have been identified in various trade related issues. The use of non tariffs and voluntary consensus standards as a basis for regulation is one way that can help in bridging the gap in many of these situations. Countries should consider selecting the best standard for their regulatory needs rather than limiting their consideration of standards to particular bodies. This is a positive move that will help in aligning their regulations to avoid any form of confusion. It is also advisable that standards development and their use not be taken as a way of trade policy or as a source of discrimination against products from other regions or countries. The use of international standards facilitates trade to the extent that technical specifications do not in any way offer an unfair trade advantage. This is through provision of preference to the qualities of the products available in area over products in another region.

Standards-related measures are associated with both positive as well as negative attributes to trade. They for instance make issues known to the WTO but at the same time, they may come along with additional costs and delays in an industry and market as a result of their divergence and complexity. In an effort to deal with the divergences presented by the standards, the Obama administration has taken part in requesting public participation through provision of comments on potential regulatory cooperation projects that have been undertaken or those that are underway. The aspect of stakeholders limiting themselves in terms of the standards they use is a contributing factor towards the increased number of unnecessary divergences in the market.

However, the principal cause of global regulatory divergence is the EU’s strategy of trying to internationalize its regional standards through various agreements as opposed to working towards developing actual international standards. Plans are, however, underway to engage the EU on this issue through the U.S.-EU High-Level Regulatory Cooperation Forum and Transatlantic Economic Council. Barriers to exports come from various standards-related measures. Nonetheless, The United States is pushing to establish more effective mechanisms for addressing such issues in bilateral, regional and multilateral programs. Although this could be advantageous it is also associated with additional costs and delays.

Development of poorly developed regulations that is associated with disruptions in trade is attributed to the failure of WTO members to ensure effective internal coordination between their regulators as well as failure to abide by TBT agreement provisions that require provision of notification to the WTO in regard to the proposed measures and taking the comments received into account. To help solve some of these problems, the Obama administration has taken charge for instance the creation of White House-led emerging technologies task force in which various parties are involved. The parties include USTR, the Office of Information and Regulatory Affairs and the Office of Science and Technology Policy.

There are many mechanisms that are used to restrict imports. The elimination of non-tariff barriers to trade in agricultural commodities is one of the objectives of the Uruguay Round of GATT discussions. One achievement of the 1994 GATT agreement is the Tarrification of agricultural commodities. According to the 2002 Farm Bill, there should be utilization of new non-tariff barriers to trade. This entails import quotas and the administration methods involved, foreign exchange controls, export limitations and bans, discriminatory preferential trading agreements and rules of origin among others.

The category involves variable charges that results when prices reach a target level or when there is anti-dumping and countervailing duties imposed on landing goods purportedly exported under varying situations or there is advanced deposit requirements on imports among other contentious situations.

Direct governmental involvement and restraining activities in trade are also covered here. This includes, government purchasing polices with local inclinations, industrial guidelines favouring local firms with connected subventions and support and state-trading and state-supported monopoly and monophony. Guidelines such as immigration policies, competition policies, macro-economic and foreign exchange policies, national taxation and social security policies are also touched by the category. The source of NTB definition depends on context.

Conclusion

From the above discussion, it is evident that there is a lot that underlie the concept of technical obstacles to trade in products and services. Some of the issues involved could be understood well in a domestic context while others are only better viewed in an international context. Trade is a crucial element in many countries of the world and it is considered to be a basic source of economic development. With the rise of concepts such as technological advancement and globalization, there has been great integration and collaboration of various countries as they exchange products and services that they produce with those that are not in their countries. Both domestic as well as international trade practices are faced with considerable number of challenges in the form of technical and regulatory barriers. The trade barriers affect both goods and services’ trade in different ways depending on the conditions that ought to be fulfilled in order to effectively carry out trade practices.

Although regulatory measures such as standard, technical barriers and control assessment procedures are aimed at enhancing trade, they are considered as major sources of trade barriers for both product and services trade. This is because the requirements to be made could take a considerable period of time and incur some cost thus slowing down trade and reducing the level of profitability.

The barriers are, however, quite pronounced when it comes to international trade due to the differences in the trade requirements and policies among different countries. It is also evident that developing nations are more affected by technical barriers to trade as they are deemed to incur some extra costs in an effort to meet the stipulated standards, testing, certification, and labelling requirements in order to conduct business especially global trade. The emergence of many new procurement policies is also an impediment to trade practices.

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