Last week, it was reported that Sri Lankan exporters had emphasized the dire need of removing Non-Tariff Barriers (NTBs) faced when goods are exported to India. According to media reports, National Chamber of Exporters President Ramal G. Jasinghe told visiting Indian journalists that Sri Lankan exporters have been facing various NTBs in Indian shores and such barriers had affected businesses adversely.
What are NTBs?
Usually, a non-tariff barrier is a form of restrictive trade where barriers to trade are set up and take a form other than a tariff. Non-tariff barriers include quotas, embargoes, sanctions, levies among other restrictions and are frequently used by large and developed economies. With the decline of tariff barriers due to the interventions of the World Trade Organization (WTO), the use of NTBs has increased.
According to the WTO, NTBs include any policy measures other than tariffs that can impact trade flows. At a broad level, NTBs can usefully be divided into three categories.
“The first category of NTBs are those imposed on imports. This category includes import quotas, import prohibitions, import licensing, customs procedures and administration fees.
A second category of NTBs are those imposed on exports. These include export taxes, export subsidies, export quotas, export prohibitions, and voluntary export restraints. These first two categories encompass NTBs that are applied at the border, either to imports or to exports.
A third category of NTBs are those imposed internally in the domestic economy. Such behind-the-border measures include domestic legislation covering health, technical aspects, products, labour, environmental standards, internal taxes or charges, and domestic subsidies.
It is difficult to obtain a comprehensive picture of the catalog of possible NTBs, but an impressive collection of studies compiled by the Organization for Economic Cooperation and Development (OECD, 2005) provides a view of the range, complexity and diversity of NTBs in practice. One study assess the relative importance for the post-Uruguay Round landscape of the various kinds of behind-the-border measures and NTBs imposed on imports as these measures are perceived by foreign exporters and recorded in various survey results.” the WTO opined.
It must be noted that a country is at liberty to impose regulations to protect local industries and ensure standards. Those are called Non-Tariff Measures (NTMs) and such measures become barriers when those are used intentionally to block trade, particularly, within the context of trade agreements.
Sri Lanka and NTBs
Sri Lanka’s exporters experience of NTBs is attributed to the NTBs faced in Indian shores. The Institute of Policy Studies (IPS) identified instances in which the rejection of products entitled under the India Sri Lanka Free Trade Agreement (ISFTA) concessions due to the ‘unawareness’ of officials as one of the major concerns. Such instances had resulted in exporters paying additional duties.
Further, the non-acceptance of Sri Lankan standard certification at the Indian end has led to delays and increased costs. The Sri Lanka Standards Institution (SLSI) has signed a Memorandum of Understanding with the Export Inspection Council of India in 2003 whereby, Sri Lanka recognizes Indian quality standards and product certifications for over 80 identified items. However, there has been no reciprocal agreement signed to state that India would accept quality standards and product certifications issued by Sri Lanka.
The IPS further noted that excessive time taken for product testing is a critical issue facing exporters of perishable goods such as strawberry. IPS research had found out that with the introduction of new food safety and sanitary regulations introduced by the Food Safety and Security Authority of India (FSSAI), exporters (of strawberry) have stopped selling to India although it is a duty free item under the ISFTA.
Research conducted by Verite Research identified that NTBs are a key factor that undermine trade between India and Sri Lanka. This is despite the two countries having a free trade agreement (FTA) in operation since 2000.
NTBs encompass other types of barriers to trade than tariff, including quota restrictions, cumbersome and inefficient border procedures, inconsistent application of rules and regulations and the lack of transparency and accountability.
NTBs of this nature increase the cost of trading and make importing products uncompetitive vis-à-vis domestic products. The ISFTA removed tariff barriers for most traded products, but does not have provisions to address NTBs. As a result, despite having duty free access, trade between the two countries remains far below potential. This report focuses on understanding the compliance-related barriers that hamper food trade between India and Sri Lanka and on identifying workable solutions to address the identified problems.
Given that the urgent need of the country is to increase exports it is imperative to find solutions to these crippling issues. Mutual Recognition Agreements empower exporters with information and removing quotas mediate solutions that should not be postponed any further.