NTBs major hindrance towards trade integration
Generally non-tariff barriers commonly known as NTBs are the restrictions resulting from explicit market requirements, conditions and prohibitions that make exportation or importation of products costly or difficult. These barriers arise from various measures taken by authorities and governments in the form of government regulations, policies and laws in order to protect the domestic markets/industries from foreign competition.
All kinds of NTBs increase the cost of doing business; it discourages and disappoints traders, and also compels consumers to pay more for buying the final product. Making a free trade agreement does not guarantee a high degree of intra-regional trade unless NTBs are removed. NTBs cannot be removed or brought down overnight. These can be phased out or replaced with less distortionary forms of barriers.
Talking about NTBs in South Asia, complex customs procedures and quality standard regulations, inefficiency of transport arrangements, institutional incapacities, different kinds of standardisation and certification processes, duty structure, packaging/labelling requirements, long negative lists, and also political insecurity in the region are the major non-tariff barriers. NTBs are the root cause of insignificant and insufficient intra-regional trade in South Asia. These are continuing to hamper trade within South Asia and also costing much more for a regional country to trade with another regional country than outside.
There still exists a huge potential of increasing regional trade but South Asian countries have yet not been able to enhance the gains from the steps taken through regional integration. South Asian Free Trade Area (SAFTA) agreement which was made to facilitate free trade among South Asian countries is not yet able to provide fruitful results. There is still an insubstantial enforcement of the agreement especially the Article 3(2)(d) “SAFTA shall involve the free movement of goods, between countries through, inter alia, the elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods and any other equivalent measures”.
The main reason of the weak enforcement of this article is the frequency of NTBs imposed by the member countries in their particular areas. This is implying negative impact on employment and income opportunities not only for common people but customers who are compel to pay extra for a specific product which could have been easily available in lesser prices if they were traded within the South Asia.
Intra-regional trade often reduced by various NTBs is only 5% of total trade as compared with 58% in EU, 52% in NAFTA and 26% in ASEAN. According to a study by CUTS International if all the tariffs can be removed completely under SAFTA it may lead to increase the intraregional trade by 1.6 times. A joint study by SDPI and CUTS International showed that the costs amounting to 34.81% of the value of total intraregional trade can be saved if regional countries commence least reforms to harmonize, regulate and remove NTBs.
Regional countries are importing various products from other countries irrespective of the fact that regional products within the region are more price-competitive. Keep the quality aspect aside this shows that key deterrent here is NTBs. The removal of NTBs on exports is much necessary for enhancing the welfare of producers and it also necessary on imports to increase the welfare of consumers.
NTBs can be addressed through latest technology, progressive approach and with shared vision. Effectively and efficiently addressing NTBs and other infrastructure related issues which are deterring trade would provide much more gains in the region for all regional countries, and removing NTBs in this region will let countries to support each other in order to involve in exceptional intra-regional trade which can further contribute in expanding exports and increasing regional growth. In return, this will also lead to strengthened global integration of the Saarc countries.
In order to enhance more intraregional trade there is an urgent need to properly identify and update the NTBs in South Asian region. Focus should also be on quantifying the impact of NTBs on producers in the region and also need to pretend possible impacts of easing the NTBs on producers and consumers in South Asia. And lastly, there is a dire need of deliberate planning and real implementation of proper policies that can diminish these trade-reducing effects in South Asia.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.