non-tariff measures

Blocking Trade With a Label

Trade policy experts frequently discuss non-tariff barriers (NTBs) or non-tariff measures (NTMs) that hamper the movement of goods across borders.  But much of this discussion takes place at a high level of generality with few specific examples.

Businesses on the ground are not particularly interested in vague discussions about NTBs.  Instead, they are occupied with trying to understand and respond to specific issues that prevent their goods from getting into or out of markets.  One underappreciated problem for companies is product labeling. 

Governments can certainly use labeling laws and regulations as a means to protect their markets from foreign competition.  Often, however, government regulatory bodies and legislators view product labels as a necessary tool to protect their citizens from harm or to provide customers with important information.

Global and regional trade rules all allow governments to regulate in the interests of public health, animal health and plant life.  For companies, ensuring safe products with reliably high quality is also important.  Hence, both government and firms would agree that regulations for product labeling are necessary. 

But many governments appear to be asking for excessive information to be included on products.  For smaller companies in particular, onerous regulations on labels can make it impossible for otherwise competitive firms to trade. 

As an example, here are the rules for exporting food products to Laos:

Food distributed directly to consumers in Laos must carry Lao language wording in a font and size that is clearly visible. Foreign language wording is also permitted.

In principle, food product labels are required to indicate the following:

·      name of product

·      registration number for food products

·      name and location of producers or company that packed products for distribution

·      country that produced the product

·      quantity of product (expressed in metric system)

·      important contents of products in percentage in relation to gross weight, in decreasing order

·      production date or expiry date, depending on products

·      if available, advice on storage, preparation methods, use of preservatives and colorings

In practice, it may be that regulations requiring Lao language labels are not always enforced.  Uncertainty is one of the biggest challenges for businesses.  Uneven enforcement of the rules means that companies could be caught out at any moment if the regulations are not strictly followed.

Thailand has equally complex rules around labels, with particularly strict provisions for dairy, baby foods, canned foods, vinegar, beverages, edible oil and fats, and gourmet powder (defined as an article containing monosodium glutamate (MSG) and used for food seasoning).  Food products must be approved and registered with the Thai Food and Drug Administration (FDA). When seeking registration, importers must supply two samples of each product, details of the exact composition by percentage of each ingredient, and six labels. Foodstuffs in sealed containers are subject to specific regulations.

Assuming a company survives this far, food products for shipment into Thailand must show labels in Thai with the following information for consumers:

·      Name and brand of the product (both generic and trade)

·      Registration number

·      Name and address of the manufacturer

·      Name and address of the importer

·      Date of manufacturing and expiry

·      Net weight and volume

·      Any additives used

·      Health and nutritional claims (if any)

Alcoholic beverages must advise the percentage of alcohol content. There must also be a health warning, printed in Thai, on the label or on a sticker, with specific wording.

Cosmetics have to be labeled in Thai with:

·      The name and type of the product

·      The name of manufacturer and address

·      Directions for use

·      Net contents

·      A statement of caution if irregular use may cause injury

These rules from Thailand are so complex, overall, that firms may have to use a local agent or importer to help register foreign products and help with labeling.  Again, for smaller firms, meeting these rules may prove impossible.

These examples may be on the extreme end, but juggling different requirements for labeling of products, boxes, packaging and so forth is a common issue across companies, countries and sectors.  If labeling rules get to be too onerous, firms will simply bypass markets entirely. 

Future posts will continue to highlight specific examples of labeling and other non-tariff barriers as well as explore how free trade agreements can conflict with labeling rules and create outcomes that governments do not always appear to appreciate.