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Obstacles to Trade from the Perspective of the Business Sector: A Cross-Country comparison

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Title: Obstacles to Trade from the Perspective of the Business Sector: A Cross-Country comparison


1
Obstacles to Trade from the Perspective of the
Business Sector A Cross-Country comparison
Third Meeting of Trade Ministers of Landlocked
Developing Countries
By Mondher Mimouni, ITC Ezulwini, Swaziland,
21-22 October 2009
2
Plan
  • Obstacles to trade
  • Raising concern of the business sector
  • Trade costs
  • Empirical evidence
  • Types of obstacles
  • ITCs Project on non-tariff Measures
  • NTM classification
  • Official data collection
  • Survey of the business sector perceptions
  • Conclusions

3
NTMs Why important for ITC?
4
NTMs Why important for ITC?
5
Definition of non-tariff measures (NTMs)
  • Several definitions exists.
  • Definition adopted by multi-agency team working
    on NTMs
  • Non-tariff measures (NTMs) are policy measures,
    other than ordinary customs tariffs, that can
    potentially have an economic effect on
    international trade in goods, changing quantities
    traded, or prices or both.
  • Difficult to make a distinguish between NTMs and
    non-tariff barriers.
  • Business sector is most concerned with the costs
    associated with NTMs and related trade cost.

6
Trade costs composition (I/III)
  • Trade costs include all costs incurred in getting
    a good to a final user other than the marginal
    cost of producing the good itself
  • transportation costs (both freight costs and time
    costs)
  • policy barriers (tariffs and non-tariff
    barriers)
  • information costs
  • contract enforcement costs
  • costs associated with the use of different
    currencies
  • legal and regulatory costs
  • local distribution costs (wholesale and retail).

7
Trade costs composition (II/III)
  • Estimate of the tax equivalent of representative
    trade costs for industrialised countries is
    170.
  • This number breaks down as follows
    (2.71.211.441.55)
  • 21 transportation costs have to be added to
  • 44 border related trade barriers, plus
  • 55 retail and wholesale distribution costs.
  • The border related barrier is a combination of
    direct observation and inferred costs.
  • Anderson and van Wincoop (2004)

8
Trade costs composition (III/III)
  • High transaction costs in trade are not simply
    analogous to high tariffs, which arise from a
    single policy instrument and can be reduced by a
    single action. High transaction costs are
    associated with interactions among multiple
    layers of transport, infrastructure, policy, and
    geography, often involving several countries.
    This means that trade facilitation efforts
    targeted at a single point in the process can be
    easily frustrated.
  •  
  • With the increased supply chains interdependency,
    imported products delivery delays have turned
    into a severe constraint on production. This is
    why customs clearance and delivery of imported
    products have become a quite important
    determinant of the production process. That is
    why Trade Facilitation has become a crucial
    aspect of trade policy.

9
Documents, time and cost for export and import
  Documents to export (number) Time to export (days) Cost to export (US per container) Documents to import (number) Time to import (days) Cost to import (US per container)
LLDCs examples            
Bhutan 8 38 1210 11 38 2140
Bolivia 8 19 1425 7 23 1747
Botswana 6 31 2508 9 42 3064
Burkina Faso 11 45 2132 11 54 3630
Burundi 9 47 2147 10 71 3705
Central African Republic 8 57 5121 18 66 5074
Chad 6 78 5367 9 102 6020
Ethiopia 8 46 2087 8 42 2893
Lesotho 6 44 1549 8 49 1715
Malawi 12 45 1671 10 54 2550
Mali 9 38 2012 11 42 2902
Niger 8 59 3547 10 64 3545
Swaziland 9 21 2184 11 33 2249
Uganda 6 39 3090 7 37 3290
Uzbekistan 7 80 3100 11 104 4600
Best practice economies            
Denmark 5  
France 2 2  
Malaysia 450  
Singapore         3 439
Developing economy            
Egypt 6 14 737 6 15 823
World Bank, Doing Business Report 2009
10
Estimated Ad valorem Tariff Equivalent for trade
facilitation barriers in Egypt
Chahir Zaki (2009)
11
Cost
Rwandan coffee 1,500 km to Mombasa (up to 40
of total costs)
Uganda apparel transport costs add the
equivalent of an 80 tax on clothing exports
West Africa shea butter producers high transport
costs from poor roads and vehicle repair costs
Unexpected detours increase costs
Source N. Christ M. Ferrantino(2009)
(extracted from M. Ferrantino presentation Chile
2009) Land Transport for Exports The Effects of
Cost, Time, and Uncertainty in Sub-Saharan Africa
12
Time
KenyaUganda border avg. 2 days to cross
UgandaRwanda border avg. 1 day to cross
CARCameroon border up to 2 weeks to cross
In 2003, wait at Bietbridge reached 6 days
Some West African corridors may have roadblocks
every 30 km
Unexpected detours increase time
Source N. Christ M. Ferrantino(2009)
(extracted from M. Ferrantino presentation Chile
2009) Land Transport for Exports The Effects of
Cost, Time, and Uncertainty in Sub-Saharan Africa
13
Road transport corruption Landlocked countries
more affected
  • USAID (2009) West Africa Trade Hub

14
Developing Country Exports Decline in 2009
Decline in Imports from Developing Country Groups
2008-2009 (USD Billions)
Imports Q1-2 2008 Imports Q1-2 2009 Change
Exporter World 5,584.2 3,776.7 -32.4
Exporter LDC 61.2 34.4 -43.8
Exporter LLDC 46.5 23.4 -49.7
Exporter SIDS 66.5 46.1 -30.8
Exporter SSA 137.2 70.5 -48.6
Exporter SVE 55.7 38.3 -31.2
Decline in Imports from Developing Country Groups
2008-2009 (USD Billions) exl HS27
Imports Q1-2 2008 Imports Q1-2 2009 Change Per Capita Change
Exporter World 4,566.3 3,245.0 -28.9 -181
Exporter LDC 17.7 15.3 -13.5 -3
Exporter LLDC 16.0 10.0 -37.7 -15
Exporter SIDS 50.0 36.6 -26.7 -232
Exporter SSA 49.7 33.1 -33.4 -20
Exporter SVE 39.1 28.9 -26.1 -38
Decline in Imports from Developing Country Groups
2008-2009 (USD Billions) Importing countries
USA, EU27, Japan, Switzerland, China, Turkey,
Australia Period Q1-2 2008, 2009 Source
TradeMap, Market Analysis Tools, International
Trade Centre,
15
LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs LLDCs (USD Thousands) - including 16 LDCs
Exporters Q1-2 2008-2009 Q1-2 2008-2009 Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008) Top Exports (HS2, Desc, Share 2008)
Exporters Change Change 1 1 1 2 2 2 3 3 3
1 Afghanistan -27,540 -33.8 8 Fruit 51 57 Carpets 41 9 Coffee 3
2 Armenia -144,500 -53.1 72 Iron, steel 20 71 Precious stones 16 22 Beverages 15
3 Azerbaijan -6,638,313 -56.8 27 Oil 97 73 Articles of iron, steel 0 8 Fruit 0
4 Bhutan 1,540 89.0 27 Oil 49 9 Coffee 46 8 Fruit 1
5 Bolivia -210,171 -31.3 27 Oil 59 26 Ores 8 23 Food residue 6
6 Botswana -273,736 -41.6 71 Precious stones 50 75 Nickel 29 26 Ores 6
7 Burkina Faso -52,338 -32.2 52 Cotton 53 71 Precious stones 17 12 Oil seed, etc 16
8 Burundi 19,949 113.1 71 Precious stones 43 9 Coffee 33 87 Vehicles 6
9 Central African Republic -14,219 -25.7 44 Wood 49 71 Precious stones 28 52 Cotton 13
10 Chad -936,481 -48.7 27 Oil 97 52 Cotton 1 13 Gums, etc 1
11 Ethiopia 44,114 9.9 9 Coffee 36 12 Oil seed, etc 16 7 Vegetables 14
12 Kazakhstan -11,400,344 -53.7 27 Oil 69 72 Iron and steel 9 74 Copper 4
13 Kyrgyzstan -70,378 -62.7 8 Fruit 24 62 Apparel, not knit 12 7 Vegetables 11
14 Lao People's Democratic Republic 108,925 62.3 74 Copper 36 61 Apparel, knit 12 44 Wood 11
15 Lesotho -68,939 -25.2 71 Precious stones 41 61 Apparel, knit 34 62 Apparel, not knit 21
16 Malawi 71,252 40.1 24 Tobacco 67 17 Sugars 6 9 Coffee 5
17 Mali -52,149 -60.3 71 Precious stones 75 52 Cotton 11 1 Live animals 6
18 Mongolia -340,563 -41.1 26 Ores 57 27 Oil 18 71 Precious stones 9
19 Nepal -21,276 -18.5 57 Carpets 12 72 Iron and steel 12 39 Plastics 7
20 Niger -33,157 -26.1 26 Ores 58 1 Live animals 9 63 Other textiles 6
21 Paraguay -220,243 -49.1 12 Oil seeds, etc 37 2 Meat 14 15 Fats oils 13
22 Republic of Moldova -174,185 -29.7 22 Beverages 12 62 Apparel, not knit 10 85 Electronics 7
23 Rwanda 2,380 5.4 9 Coffee 45 26 Ores 34 22 Beverages 8
24 Swaziland -49,232 -24.7 17 Sugar 21 33 Essential Oils 12 21 Misc edible 10
25 Tajikistan -93,108 -32.7 76 Aluminum 63 52 Cotton 16 8 Fruit 11
26 The former Yugoslav Republic of Macedonia -661,482 -45.0 72 Iron, steel 32 62 Apparel, not knit 17 73 Articles of iron, steel 6
27 Turkmenistan -912,242 -60.0 27 Oil 94 52 Cotton 3 39 Plastics 1
28 Uganda -66,292 -17.9 9 Coffee 26 3 Fish 7 85 Electronics 5
29 Uzbekistan -538,390 -45.6 27 Oil 36 52 Cotton 12 87 Vehicles 12
30 Zambia -114,571 -15.2 74 Copper 66 26 Ores 13 81 Other metals 6
31 Zimbabwe -251,485 -47.6 75 Nickel 21 24 Tobacco 14 72 Iron, steel 13
Total LLDCs -23,117,174 -49.7 27 Oil 63 72 Iron and steel 5 74 Copper 4
16
Non-tariff measures and trade liberalisation
  • Shallow liberalisation (only tariff elimination)
    can in certain cases lead to a small welfare
    decline.
  • Deep integration (inlcluding elimination of
    regulatory barriers and red tape and an
    improvement in the business environment) can
    results in the substantial welfare gains.
  • Example Egypt-EU
  • Egypt already has duty-free access to the EU for
    manufactures. Given Egypts trade patterns, the
    loss in tariff revenues that will be incurred
    outweighs any trade creation.
  • Deep integration can results in welfare gains
    (more than 4 growth in real GNP)

Hoekman, B. and D. E. Konan (1999), Konan, Denise
and Keith E. Maskus (1997)
17
Types of NTMs Current situation
  • Only limited information on NTMs existing
  • Existing information scattered across various
    countries various sources within countries
  • Poor access to existing information
  • Time consuming for exporters to research measures
    that may concern their products

18
Implications
  • Urgent need for a common international NTM
  • classification and methodology to systematically
    collect,
  • analyse and disseminate data on NTMs
  • This can address the following issues
  • Lack of common definition
  • No agreed taxonomy
  • Inadequate data Existing data is limited, not
    structured and not comparable
  • No agreed methodology for quantification
    In-depth analysis currently not possible due to
    lack of information

19
Multi-Agency Team
  • Members FAO, IMF, ITC, OECD, UNIDO, UNCTAD,
    World Bank, WTO.
  • Observers EC, USDA, USITC
  • Biannual meetings
  • Agenda
  • Provide clear and concise definition of NTMs
  • Develop classification system of NTMs to
    facilitate data collection process and analysis
  • Devise ways to collect efficiently the
    information on NTMs taking into account existing
    mechanism of collecting specific elements of NTMs
    by each member agency
  • Provide guidelines for the use of data, including
    their quantification methodology

20
ITC-UNCTAD pilot project Activities
  • Country programme in 7 pilot countries
  • Large-scale business survey (300-500 face-to-face
    interviews) with exporters and importers about
    their daily experiences with NTMs
  • Collection and classification of official NTM
    data applied by the pilot countries
  • Inititialisation of sustainable country-level
    data collection mechanism
  • Inititialisation of public-private dialogue.
  • Initialisation of official NTM data collection
    from major importing countries (share in world
    imports larger than 1 including EU, US, Japan,
    China, Canada, Russia, Mexico, Turkey, etc.)

21
The way forward
  • Official launch of new NTM classification (5
    November 2009)
  • UNCTAD Group of Eminent Persons Meeting
  • ITC-UNCTAD collaboration on the collection,
    classification and dissemination of NTM
    regulations
  • Data collection
  • Targeting 50 countries by year (ITC and UNCTAD),
  • Collaboration with national and regional
    partners,
  • (ALADI, ASEAN, COMESA, monitoring
    intra-regional NTMs)
  • priority on major importing countries (gt1 of
    worlds imports)
  • Dissemination
  • New, integrated application on market access
    data, including NTMs (ITC, UNCTAD, World Bank).
  • ITC country projects on obstacles to trade
    (company surveys)
  • 2009-2012 Roll-out in 27 countries financed by
    DFID

22
Collaboration on NTM official data
NTM Classification 16 Chapters
23
Official data on NTMs (I/III)
  • Example Descriptive overview of applied
    measures/regulations by the Philippines

24
Official data on NTMs (II/III)
  • Example Applied measures/regulations and
    imports in the Philippines

25
Company level survey on non-tariff barriers
(NTBs) experienced by the business sector (I/II)
26
Company level survey on non-tariff barriers
(NTBs) experienced by the business sector (II/II)
Categorisation of obstacles to trade New
classification of non-tariff measures that has
been prepared in the framework of UNCTADs
multi-agency initiative on NTMs. Questionnaire Com
panies were asked to report cases of non-tariff
barriers impeding their trade. Each case includes
a reference to 1 product (or product group) 1
export destination, 1 measure according to the
new NTM classification and the related
procedural obstacle they face in relation to
the applied measure. Example of one non-tariff
barrier case Export of Cane or Beet Sugar from
Uganda to Burundi, Inspection and clearance
requirement, Too complex mechanism.
27
Survey Key Findings from 5 Countries
  • The analysis suggests that trade barriers vary
    considerably across countries, sectors and
    trading partners.
  • Destination countries
  • Many obstacles to trade are experienced when
    trading regionally.
  • Many obstacles to trade are highly concentrated
    on specific sectors sometimes, these sectors
    account for a major share in exports to this
    destination, sometimes only for a marginal share.
  • The affected goods often enjoy preferential
    tariff treatment by the destination country.
  • The experienced obstacles to trade can be often
    associated with a lack of infrastructure and
    efficient procedures in the country of origin.

One landlocked country (Uganda) and four
developing countries (Chile, The Philippines,
Thailand, and Tunisia)
28
SurveyTypes of Reported Barriers
Based on the data analysis for 5 countries
Chile, the Philippines, Thailand Tunisia, Uganda
29
Survey Export destination matters
30
Survey Intra-regional trade and NTBs in Uganda
31
(No Transcript)
32
Selected results from the survey of the business
perceptions in Uganda
  • Overwhelming number of the interviewed exporters
    complained about poor infrastructure (roads and
    railway), high air freight charges, power
    shortages, access to loans, low skills on
    technology, low access to information. Very few
    comments concern destination markets outside
    Africa (EU, US, Asian markets).  
  • The government should standardise and improve on
    its facilities like warehouses and cold rooms.
    Sometimes the Entebbe cold room malfunctions and
    this leads to spoiling of many flowers awaiting
    export, thus revenue is lost.
  • Trade with Sudan is really ok. The only problem
    is roads.
  • Transport from Mombasa to Kampala is more
    expensive than transporting a container from
    China to Mombasa.

33
Survey Business environment at home matters
  • Selected results from the survey of the business
    sector in the Philippines
  • Procedures in the Philippine Customs (89
    reports)
  • the behaviour of the customs officers (46 52)
  • - corruption (25)
  • - too slow (17)
  • recognizing other registrations (3)
  • inconsistent (1)
  • increasing rate of duty / varying rate of duty
    (11 12)
  • excessive documentation causing delays (6 7)
  • regulations to obtain export permit to strict (6
    7)
  • Certificates needed from the Philippine
    authorities (169 reports)
  • the Certificate of Origin (41 11)
  • the phytosanitary certificate needed from the
    Bureau of Plant Industry (BPI) (30 8 )
  • the fumigation certificate (19 5)
  • too detailed, strict or excessive documentation
    (17 4,5)
  • documents should be authenticated by embassy (8
    2)
  • quarantine clearance (8 2)

34
Survey Imports are also affected
Selected results from the survey of the business
sector in Tunisia
Table 11 NTM Impacting Imports in
Tunisia Proportion of cases reported (product and
partner ) per different NTM chapters
Chapter Total Share
Technical barriers to trade 814 77
Para-tariff measures 123 12
Finance measures 37 4
Sanitary and phytosanitary measures 35 3
Other technical measures 24 2
Anti-competitive measures 6 1
Rules of origin 5 0
Quantity control measures 5 0
Price control measures 1 0
NA 2 0
Grand Total 1052 100
35
Survey Reported Procedural Obstacles
36
Conclusions
  • Survey and research show that
  • NTBs are a major impediment to trade
  • Part of the NTBs are directly related to business
    environment
  • In many cases intra-regional trade is more
    affected.
  • Business sector in the landlocked countries
    experience more obstacles to trade due to
  • Implications for transport (cost, time,
    uncertainty)
  • Requirements to comply not only with domestic and
    partner country requirements but also with the
    requirements in the transit country(ies)
  • The target ITCs project on non-tariff measures
  • Identify problems (through business surveys and
    official data collection)
  • Discuss them with national, regional and
    international institutions
  • In order to be effective, economic policies
    should address NTBs.

37
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