A Review of theoretical approaches and A Review of theoretical approaches and mathematical models for non-tariff mathematical models for non-tariff

barriers to trade: Sanitary and Technical barriers to trade: Sanitary and Technical Barriers for agricultural productsBarriers for agricultural products

Sponsored by the Hewlett/IATRC Program – Capacity Building

Washington – DCJan 9, 2008

Sílvia Helena G. de Miranda – University of São Paulo

Prof. G. Edward Schuh – University of Minesotta

Outline Outline

1- Introduction

2 – Objectives

3 - Identifying Sanitary and Technical Barriers to Trade

4 - Mathematical Approaches to Measure Effects of Sanitary and Technical Barriers to Trade

5 - Public Policy Choices – Models to Support Government Decisions on Sanitary and Technical Issues

6 - Final Comments: Challenges for the Developing Countries

1 - Introduction

- Sanitary (SPS) and technical barriers: most of problems are related to voluntary standards

- Cause losses in competitiveness, raise costs, can exclude suppliers from the markets

- Concerns with food safety, territory and environmental protection, consumer security are spreading all around the world:

- consequently stricter regulation will prevail - consumers will benefit- difficulties for developing countries - lags between richer and poorer increase

- What technical or sanitary measure consists on a barrier?- How to disentangle legitimate from illegitimate requirements?

2 – Objectives2 – Objectives

ToTo present an updated review of literature on present an updated review of literature on::**- - the conceptual background for sanitary and the conceptual background for sanitary and

technical barriers to tradetechnical barriers to trade;;

- - the methodologies available to quantify the effects the methodologies available to quantify the effects of such barriersof such barriers: advantages and limitations: advantages and limitations

**HighlightingHighlighting: : -- the new features of this subject the new features of this subject- the developing countries challenges;- the developing countries challenges;- the support to public policy- the support to public policy

3. Identifying Sanitary and Technical Barriers 3. Identifying Sanitary and Technical Barriers to Tradeto Trade: : Divergences and Convergences of Divergences and Convergences of Concepts and DefinitionsConcepts and Definitions

• Regulation x Standard

• What are the motivations to raise regulation/standards?

• Trade effects and welfare effects

• Even if voluntary (private) standards are affecting trade flows, for the governments they are not considered barriers, in the sense of being subjected to public policy intervention;– Nor are they for the international organizations;

• Measures that restrict trade by chance while correcting market inefficiencies and addressing legitimate concerns should not be qualified as an NTB (Beghin and Bureau, 2001)

• However, the government is expected to provide infrastructure to support the compliance of countries to standards.

3. Identifying Sanitary and Technical3. Identifying Sanitary and Technical Barriers to Barriers to TradeTrade: : The Classification of NTB and the Legitimacy The Classification of NTB and the Legitimacy

IssueIssue

• Checklist:– TPSC (1998) – for SPS– Popper et al. (2004)/NIST – for TBT

• Classification1) For Technical barriers– Roberts et al. (1999): by police and by scope; by regulatory goal –

verify if it is welfare-reducing or welfare-enhancing

– Josling et al. (2004): identify the regulatory agents; dimensions of the measure; the tools employed by regulatory measures

2) For SPS and TBT measures- Miranda and Barros (2005): trade and welfare effects; legallity; scientific

consistency – in order to evaluate and rank the measures by their legitimacy and relevance

3. Identifying Sanitary and Technical3. Identifying Sanitary and Technical Barriers to Barriers to TradeTrade: : Collecting Data for Sanitary and Technical Collecting Data for Sanitary and Technical

Barriers to TradeBarriers to Trade

• Inventory approach and surveys

1 - Inventory Approach: Notifications, Specific Trade Concerns– Difficult to have a proper database for sanitary and

technical barriers to trade – SPS and TBT’s notifications: may highlight trends in

terms of sanitary and technical regulation– Closer to identifying barriers

• STC and • data on refusals in commerce: only the US has the registers

– Source of data for modelling – but with limitations

Table 1 – Data used for inventory approaches regarding SPS and TBT issues

Source: elaborated by the authors. * Apud Beghin and Bureau (2001)

Reference Data used for inventory approaches Ndayisenga and Kinsey (1994)*

- The percentage of standards based on international references; - Data on detentions at the border; and - Complaints against discriminatory regulatory practices.

Swann et al. (1996)* Counts of voluntary national and international standards recognized by the UK and Germany

Moenius (1999)* Counts of binding standards in a given industry as a measure of stringency of standards

Lux and Henson (2000)*

Border detentions in the US

Otsuki et al (2001) Maximum allowable contamination, adopted as a direct measure of the severity of food safety standards

Fontagné et al. (2001) Frequency statistics: different thresholds on the number of countries implementing restrictive regulation for a given tradable good (environmental trade barriers)

Barros et al. (2002) Notifications to SPS/WTO for Western Hemisphere countries as a proxy of sanitary barriers and trends for international regulation

Moenius (2004) Number of country-specific and shared standards (and gravity model)

Silva and Miranda (2007)

Notifications to SPS/WTO on residues

Longhi Jr. and Miranda (2007)

Data of refusals registered by the OASIS for fruits imports

Sbarai and Miranda (2007)

Notifications to TBT related to environmental legitimate objectives

Machado and Miranda (2007)

Notifications to SPS and TBT on beef sanitary issues, and also the Specific Trade Concerns related to the SPS Agreement

3. Identifying Sanitary and Technical3. Identifying Sanitary and Technical Barriers to TradeBarriers to Trade: : Collecting Data for Sanitary Collecting Data for Sanitary

and Technical Barriers to Tradeand Technical Barriers to Trade

2 – Surveys- Also a method for collecting data, quantitative or

qualitative information;

- There are restrictions on using this approach for quantitative studies: quantification approach is appropriate, otherwise if it deals with measuring the compliance costs faced by firms and industries;

- Literature: OECD (1999), USDA (1996), Roberts and De Remer, 1997; Thornsbury et al., 1999; Henson et al. (2000) Wilson and Otsuki (2004), Burnquist et al. (2006), Faria and Burnquist (2006), Baller (2007)

4 - Mathematical Approaches to Measure Effects of 4 - Mathematical Approaches to Measure Effects of Sanitary and Technical Barriers to TradeSanitary and Technical Barriers to Trade

Previous works on this topic:• Deardorff and Stern (1998)• Laird (1996)• Maskus and Wilson (2001) and • Beghin and Bureau (2001)

List of commonly used methods applied to List of commonly used methods applied to san/tech barriers quantificationsan/tech barriers quantification

• The Price Wedge Method: trade-effects

• Gravity models: trade-effects

• Stylized microeconomic approaches: what is the effect of standards on the structure of competition among firms?

• Multi-market models and sectoral approaches: partial equilibrium models – trade effects and also welfare-effects

Public Policy Choices – Models to Support Public Policy Choices – Models to Support Government Decisions on Sanitary and Government Decisions on Sanitary and

Technical IssuesTechnical Issues

• For Public policy: it is important to work with an ex-ante approach– Cost-Benefit Analysis- Risk assessment – CGE– Relevance Index

• For developing countries: concerns on providing tools to have a better resource allocation

Final commentsFinal comments

• Sanitary and technical requirements imposed by governments and companies are increasing and becoming more restrictive

• Challenge for developing countries: higher production and marketing costs to comply with the requirements and tecnological lags

• Enlarge the conceptual framework for analyzing non-tariff barriers to account for voluntary standards and other trends being faced by companies in the day-to-day experience of international trade!

• The developing countries will probably increase their demand on public agents to provide conditions to help achieve those requirements

• It is important to evaluate how to deal with voluntary standards in the international organizations involved with trade issues

Final commentsFinal comments• It is important to have tools to help in the cases in which the protectionist

component is unclear but where the regulations have a genuine concern about consumer protection: the legitimacy issue

• A more active participation of developing countries in international fora to discuss sanitary and technical regulation and normalization

• For dealing with impacts of sanitary and technical barriers – it is still better to use a case-by-case approach

• Improve ex-ante analytical tools – public policy

• A technical barrier to trade that may become increasingly important in the future involves measures that may be out in play to attenuate global warming – new trends for technical barriers

• Next steps: a graphic analysis, further developments in CGE models