Beyond tariff walls: Non-tariff hurdles in sub-Saharan Africa
It is often said that international trade is no longer a game of tariffs but rather a game of quality, standards, and compliance with the requirements of the global market. Exporters, more specifically those from developing countries, feel this the most as they struggle with what is known as non-tariff measures (NTMs) in their daily quest for international competitiveness.
NTMs are officially defined as ‘“policy measures on export and import, other than ordinary customs tariffs, that can potentially have an effect on international trade in goods. They are mandatory requirements, rules or regulations legally set by the government of the exporting, importing or transit country.’’ NTMs become an obstacle to trade for exporters and importers when they are perceived to be ‘’burdensome’’ by the latter. Since 2010, the International Trade Centre (ITC) has been working with the private sector from developing countries, collecting information on the various obstacles to trade faced by the business community in these countries. This project was initiated in order to increase transparency about NTMs by disseminating relevant information and by analysing the non-tariff obstacles to trade. The ultimate goal is to reduce or eliminate those barriers, thus improving the business environment. In sub-Saharan Africa (SSA), the ITC NTM Surveys have already been conducted in Burkina Faso, Côte D’Ivoire, Guinea, Kenya, Madagascar, Malawi, Mauritius, Senegal, Rwanda, and Tanzania.
Beneficiary countries are already using the findings of the ITC NTM Surveys to remove impediments to trade. To mention but a few: In 2013, Mauritian customs authorities eliminated the need for imports of rooibos tea to be cleared by the Tea Board; the Senegalese export promotion agency is considering the NTM Survey findings and recommendations in its export development strategic plan for 2014–2017; and similarly the government of Madagascar intends to integrate some of the findings into its trade policy and trade negotiations. The ITC NTM Surveys are also extensively used to inform the work of other development partners, such as in the framework of diagnostic trade integration studies, for example in Malawi.
Which are the most burdensome NTMs for African exporters?
The results of the surveys done in the ten SSA countries show that the top three NTMs identified by exporters as most burdensome are conformity assessments, technical requirements as well as rules of origin and the related certificates of origin. Other identified barriers include pre-shipment inspections and further entry formalities, charges, taxes and other para-tariff measures, including licensing or permits to export. Overall, 64 percent of the interviewed companies in SSA were reported being affected by NTMs. The figure of 64 percent found in SSA is above the average (50 percent) obtained from the total number of countries surveyed by the ITC so far. This would imply therefore that exporters and importers in this region seem to be more affected by burdensome NTMs.
In the agricultural sector, “technical requirements”, which include sanitary and phytosanitary measures (SPS) implemented to protect human, animal and plant life (e.g. requirements such as tolerance limits for residues and measures for labelling and packaging), and “conformity assessments” are perceived as the most challenging by SSA exporters. Conformity assessments refer to control, inspection and approval procedures (such as testing) which confirm that a product fulfils the technical requirements and mandatory standards imposed by the importing country. These two categories are known as SPS measures and Technical Barriers to Trade (TBT) in the NTM classification. They are inevitable for most agricultural products since they are put in place to meet public policy objectives, such as consumer protection. These product-specific, legally binding requirements are challenging predominantly in developed markets like the EU. Exporters usually complain that such regulations are particularly burdensome in their implementation process because of associated delays and high fees.
This result comes as no surprise, as the globally most widespread NTMs relate to technical factors like SPS measures. Most developed nations have strict quality and food safety standards and are increasingly introducing stringent food safety regulations. The EU, for instance, has a whole raft of regulations that require exporters from outside the EU to meet the same standards as EU members when it comes to foodstuffs. Moreover, new rules are increasingly being introduced, for example for labelling. The United States, through its own Food Safety Modernization Act (FSMA), also places extensive requirements on imports.
With TBTs increasing globally, they leave SSA exporters (including those concerned with conformity assessments) vulnerable especially due to the lack of the necessary infrastructure in their respective home countries. Furthermore, delays experienced with the home administration (e.g. at customs) have dire consequences for exports, particularly of perishable agricultural products (e.g. fresh food).
As far as manufacturing exports are concerned, technical requirements are often less important than in the agricultural sector. However, challenges from conformity assessment still stand out at 44 percent and concerns about rules of origin, i.e. the criteria used by importing countries to assess whether a product is eligible for preferential treatment, are also quite pronounced (17 percent of total NTMs reported for SSA countries). For instance, burdensome NTMs related to rules of origin were commonly reported by exporters in Côte d’Ivoire.
Who applies NTMS?
The ITC NTM Surveys suggest that, among the challenging NTMs reported by exporting companies, on average around 70 percent are applied by the partner countries and 30 percent happen at home. Comparatively, in SSA, nearly 40 percent of NTMs are reported to be applied by the home country, while about 60 percent are reported to be applied by partner countries. Therefore, if SSA countries want to boost their competiveness and establish themselves on the main stage of international trade, their national and local authorities need to address the obstacles to trade linked to NTMs occurring at home, although it is also clear that domestic efforts need to be complemented with a continued engagement with international trading partners.
The findings also show that many burdensome NTM cases are associated with partner countries with which SSA countries already have free trade agreements (FTAs) or regional trade agreements (RTAs). For example, in Guinea there were reports about customs surcharges (e.g. surtax or additional duty) imposed by Mali and Côte d’Ivoire, all of whom are members of the Economic Community of West African States (ECOWAS). 64 percent of NTM reports from Guinea concern neighbouring ECOWAS countries. We see similar results for other regions: In Tanzania, for example, an overwhelming majority (64.4 percent) of the reported cases of NTMs are applied by partners from within regional frameworks, i.e. the East African Community (32.9 percent), followed by the Southern African Development Community (31.5 percent). This indicates that there is still room for the elimination of non-tariff barriers by RTA/FTA counterparts. Tackling these obstacles could help achieve better trade integration among SSA countries.
The way forward
Problems linked with NTMs are often exacerbated for landlocked countries (such as Rwanda), where obstacles associated with transit countries are particularly severe, including in terms of weighbridge charges and delays before goods can be delivered. One significant intervention to consider is to establish a results-oriented dialogue and negotiation with regional partners or bilaterally with neighbours.
In addition to government requirements, SSA exporters sometimes face onerous standards imposed by private clients. For example, the Rwandans particularly reported Fair Trade certificates demanded by clients in the European Union, especially for Rwanda’s important coffee and tea products. The costs and delays associated with these certificates are said to cause serious hindrances for exporters.
Taken together, SSA exporters and importers report a large amount of NTMs faced in their efforts to engage in the global trading system. There seems to be consensus that technical measures, conformity assessments, different charges, rules of origin and customs procedures are among some of the most burdensome restrictions traders encounter. Hence, a number of initiatives are being launched to address these measures both internationally and domestically, but more work is needed to alleviate such constraints. For instance, there is scope for improved engagement between policy makers and their exporters and importers. Better dialogue between the different stakeholders from both private and public sectors can prepare the ground to develop effective and sustainable policies to remedy some of the concerns, as well as to clarify those instances where lack of awareness may be also one of the obstacles. Traders from a number of SSA countries indicated their desire for a one-stop shop or single window to process documentation. Others highlighted the need for a single enquiry point to obtain all the necessary documents required in destination and home markets to qualify for certifications.
Tackling such obstacles could help SSA countries take giant leaps towards improving their trade environment.
The debate surrounding NTMs is ongoing and numerous questions about their legitimacy are being raised. Even though it is generally accepted that NTMs may have the best policy intentions in terms of public health, their frequency and complexity negatively affect the trade flows of more vulnerable countries, such as those from the SSA region. Furthermore, they are sometimes perceived as protectionist measures used by governments. Regardless of their underlying motives, NTMs actually impose costs that have negative impacts on trade competitiveness, particularly for small and medium-sized enterprises (SMEs) in emerging and developing countries. Often NTMs themselves are not barriers per se, but the procedural obstacles associated with them have negative consequences for trade. The problems found impacting industries in SSA take an even more burdensome toll on trade and are more surprising at a time when individual governments and the international community are mobilizing all efforts to alleviate poverty and promote engines of growth.
Author: Poonam Mohun NTM Project Market Analyst, Market Analysis and Research, International Trade Centre. The views expressed herein are those of the author and do not necessarily reflect the views of the International Trade Centre or of the United Nations.