Necessary but dangerous: Non-tariff barriers in action in the EPA
Last week I had indicated that this week’s column would illustrate the way in which non-tariff barriers are addressed in the Cariforum-EC, Economic Partnership Agreement (EPA). I believe this is the best way for readers to comprehend the many technicalities involved in this term. To remind readers, non-tariff barriers to trade are being treated as the third of three issues which I had identified as the main stumbling blocks to global agricultural trade reform. Such reform, I had also argued, holds the best prospect for a long-run sustainable solution to episodes of rapid runaway increases in food prices followed by collapses.
There is an ambiguity to non-tariff barriers. Everyone agrees that these are undoubtedly needed to regulate trade in the interests of safety and fairness. At the same time, however, the same non-tariff barriers can be used dangerously, as means of manipulating trade and discriminating against imports. Indeed, their adverse impact on global trade has risen sharply in recent times. Fortunately, experience in trade negotiations, that is, “learning by doing” has given countries a good idea of the ways in which such barriers are based. Thus in the EPA, the principal areas of abuse of non-tariff barriers are identified as quotas, trade licences, and rules leading to unfair competition between imports and domestically produced products. These are then outright prohibited.
National treatment
As readers would be aware, Caricom’s international trade is mainly trade in services, not goods. So far, the examples that have been considered in relation to non-tariff barriers (for example, health regulations in regard to food imports), apply to trade in goods. Such a barrier would be ineffective for trade in services. In keeping with WTO commitments this matter is covered by the application of the basic principle of national treatment. The EPA thus requires that imports (of goods or services) are given the same conditions in economic transactions as those for domestically produced products. This prevents the use of any discriminatory measures against imports from the European Union into the region. More specifically, 1) it prohibits taxes on imports that do not apply to domestic production; and 2) it requires that regulations and laws affecting all aspects of commercial transactions in a product must apply equally to imports and domestic production.
Generally the provisions of national treatment also require that governments do not offer domestic support or subsidies to domestic products and national production. This does not apply, however, in the EPA. As we saw in previous articles the EU continues to pay huge subsidies to its farmers. Caricom governments can, in theory, do the same, but they do not have the resources to do so effectively.
General exceptions
To readily allow for those legitimate instances for which non-tariff barriers may be used, the EPA has provisions for what are termed as general exceptions to the agreement. Thus in Part IV of the EPA, under the heading General Exceptions, Article 224 provides that subject to the requirement that measures are not applied in a manner so as to discriminate against each other’s trade, three sets of barriers are always permissible. First, those needed “to protect public security,” including public morals. The latter would include instances to protect against the use of child labour. Second, measures to protect “human, animal or plant life or health.” And, third, provisions preventing fraudulent practices and corruption, the protection of “confidentiality, public safety, the use of prison labour, protecting intellectual property rights, and so forth.”
TBT and SPS
Non-tariff barriers are generally constituted separately under two major heads, namely, Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary Measures (SPS). As a rule the capacity of the region to operate effective mandatory standards on imports of goods and services is as notoriously low as it is high in the EU. This asymmetry puts the trade of the two parties to the EPA on an unequal footing. In part recognition of this sobering reality, the EPA contains a number of good-intent, best endeavour commitments by the EU to aid in the development of regional capacity in this regard. All such assistance is expected to produce regulations that are in conformity with the WTO Agreement on Technical Barriers to Trade (TBT). Sanitary measures are those designed to protect against health risks to humans (disease, etc) and Phyto-Sanitary Measures are directed at protecting animals and plants from pests and contaminants.
In all the areas discussed here, one of the first requirements for Cariforum is to integrate and make uniform across the region, the application of these measures. This is, however, no easy task, as capacity in this regard is very unevenly developed across the region. These measures call for trained personnel, legislation, the harmonization of standards, administrative capacity to implement them, as well as assured and sustained financing.
These are in scarce supply and as a consequence regional trade, especially in areas of food safety and labelling, has been impeded. In Europe there is also the requirement (since 2006) for food imports to be HACCP certified which creates an important barrier to regional exports to the European Union. Caricom has established CROSQ as its standards-setting body.
This rather extended discussion on Guyana and rapidly rising food and fuel prices globally, has been taking place in the context of much global economic uncertainty and increasing challenges to the provision of food security at the global, regional, and national levels. These further considerations will be addressed next week as I seek to conclude this discussion.