RCEP officials are currently meeting again for Round 13 in Auckland, New Zealand. The 16 Asian countries involved in these talks are spending the morning discussing a critically important topic for business: non-tariff measures (NTMs) or non-tariff barriers (NTBs).
NTMs sound dreadfully boring, but they are likely the very impediments to trade that drive most companies crazy. Non-tariff barriers can include things like inconsistent standards, unclear regulations, shifting and unnecessary rules, expensive testing requirements, and weird labeling laws.
While many standards and regulations have legitimate purposes of keeping consumers and the environment safe, many do not. Many—let us be honest—are imposed with the purpose of keeping foreign products out of the market or making life difficult and expensive for foreign competitors.
The consequences of many NTMs are significantly higher costs. These costs are imposed on consumers and on companies. The World Economic Forum found that reducing of NTBs would have far larger benefits than the elimination of tariffs. Reducing NTBs just halfway to global best-practice would increase world GDP by 4.7%, as opposed to 0.7% through tariff removal.
RCEP countries have an opportunity to discuss how some of these NTMs could be reduced or eliminated. One useful place to begin may be the reduction and elimination of duplicative testing and recognition of similar standards across RCEP countries. All members have similar goals: economic prosperity; healthy, safe populations; and reasonable, transparent guidelines that work well for businesses and regulators.
At present there are a number of non-tariff barriers (NTBs) enacted by RCEP countries. NTBs cover everything from customs practice, subsidies, and foreign currency controls. The most prevalent NTBs are sanitary and phyto-sanitary (SPS) measures, which aim to protect humans, animals and plants from disease, and technical barriers to trade (TBT), which are safety and environmental standards on products and their production. Across RCEP, 8,180 NTBs have been initiated or are currently either initiated. These barriers may apply bilaterally, multilaterally, inter or intra-ASEAN. The attached Policy Brief shows these barriers graphically.
Clearly there are large differences between NTBs among RCEP members. In general, ASEAN countries have fewer than non-ASEAN countries. This represents some success in the ASEAN Economic Community (AEC), the limited size of ASEAN markets leading to lower interest from exporters, the openness of Singapore and Brunei, and the lack of WTO engagement and regulations among Cambodia, Laos, Myanmar and Vietnam (CLMV) countries.
This data does not quantify the impact of NTBs. Many NTBs will be legitimate and innocuous, while some may prevent millions of dollars in trade. Regardless, the disparity suggests improvements can be made. There is a relationship between trade and NTBs. RCEP countries with fewer NTBs generally have a higher proportion of trade to GDP.
As RCEP countries consider how to address NTMs and NTBs, five shared principles should guide negotiations:
1. States have a right to take measures which protect their national security and public health
2. Unnecessarily varied measures increase costs for producers and consumers
3. Measures should be transparent and specific, but easily comprehensible
4. Measures should be evenly enforced so as not to discriminate between local or foreign producers
5. Changes to measures for security or health reasons should be
a. Justified by scientific evidence
b. Give producers sufficient notice and opportunity to respond
These principles will make it easier for everyone to participate in economic growth, and reduce the opportunities for corrupt practices.
1. Countries should use international standards as much as possible. Not only will these ease comprehension and transaction costs for SMEs, but will facilitate trade with countries outside RCEP. This is particularly important for smaller companies to stay competitive.
2. Try to build on what exists in domestic laws, rather than creating new RCEP rules from scratch. Or worse, bolting on new RCEP level rules without reexamining existing domestic level regulations for conflict and potential overlap.
3. Eliminate double testing through Mutual Recognition Agreements (MRAs) – agreeing to recognize the results of another country’s testing agency. Recognize that different countries will have different means of achieving the same testing ends, which may vary by product. Some may use Non-Government actors, some may accept industry self-regulation, and some may use government agencies for testing. Provided they achieve the same aims, parties should not discriminate. This said, standards and evidence would need to be peer reviewed – even if other bodies conduct regular implementation.
4. Establish RCEP SPS and TBT Committees to discuss testing and standards issues, with a goal of harmonizing standards wherever possible. These committees should have regularly scheduled meetings, with working groups in more regular contact over specific technical matters. Meetings should be announced in advance to allow companies an opportunity to comment on proposed recommendations by committee members.
5. Committee should develop a sensible, risk-based testing and standards system. For instance, an electrical child’s toy should be tested more thoroughly than clothes pegs. Opportunistic changes to regulations are to be avoided to improve certainty and encourage investment.
6. Bans and controls based on SPS or other safety issues should be reviewed on a regular basis. E.g. a health concern that resulted in import restrictions that has since been resolved should see restrictions removed soon after. A scientific rationale should apply to lifting controls, as it does for imposing them.
7. Language such as ‘parties will endeavor…’ or ‘encourage’ are to be avoided. It is preferable to stipulate realistic targets, with different time-frames and technical assistance for some members, if necessary.
8. Labeling requirements should be as consistent as possible and designed with consumers in mind. Provide companies with an opportunity to comment on proposed changes to regulations.
***A longer version of this Talking Trade blog post also appears here as a Policy Brief, written by Jack Coleman***
 Enabling Trade Valuing Growth Opportunities. (2013). World Economic Forum. Retrieved from http://www3.weforum.org/docs/WEF_SCT_EnablingTrade_Report_2013.pdf
 World Bank data, 2014