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As trade integration has intensified over the past decade, market access has ceased to be solely about tariff liberalisation. Non-tariff barriers now pose at least as serious costs to exporters.
The reference in the Doha Work Programme to the need to address non-tariff barriers in the non-agricultural market access negotiations – pushed by developed countries steeped in the exportation of industrial products – is certainly a recognition of this fact. In the same vein, developing countries have argued firmly for reductions and stricter disciplines in domestic support in the agriculture negotiations.
As tariffs continue to decrease incrementally worldwide – either as a result of autonomous liberalisation or of international trade agreements – qualitative standards and regulations have significantly increased the cost of exporting to many destinations. Although often well-intended and legitimate, government-mandated technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures that are supposed to be consistent with the relevant WTO agreements have proved quite a challenge for small and medium-sized enterprises from developing countries in particular.
Privately set standards, mostly beyond reproach or dispute by governments, frequently pose even greater hurdles to developing country exporters. Such standards may be established, for instance, by retailers’ or distributors’ associations, or as part of a set of requirements to be able to participate in a vertically integrated, production-to-market chain. Measures such as these can spell the difference between an exporter’s ability to compete in a trading partner’s market or to gain any access to that market at all. The cost of compliance with both government-mandated SPS and TBT measures, as well as private standards, has over time become significant compared to tariffs (see related article on page 8).
The situation is compounded by the continuing domestic support that producers, particularly in the agricultural sector, receive from their governments. These programmes distort the conditions for competition faced by exporters in such markets. Although subsidies do not change the terms of market access as such, they do influence the nature of the competition, including the price which markets will tolerate. Exporters need to factor in the additional cost of specific subsidies when pricing their products for a particular market.
There appears to be value in a more accurate determination of the real cost of market access by consolidating the costs – tariffs, non-tariff barriers (SPS/TBT/private standards), the equivalent cost of competing against domestic support – faced by exporters. ICTSD has started an initiative that examines the possibility of establishing a ‘composite index of market access’ (CIMA) as a measure of the real cost of entry for a particular product in a country’s domestic market. Initially, the exercise intends to develop a model for determining such an index for tropical products, with a view to exploring its applicability to other products in the future.
The seeds of this project were planted in December 2007 in Bahia during an ICTSD-ICONE dialogue on tropical products, where a primary outcome was a consensus to seek a more comprehensive tool for measuring the actual liberalisation in these products. For instance, what would be the actual cost to exporters of rice to Japan, if the cost of compliance with the country’s SPS measures and its private sector-set standards for this product were duly taken into account alongside standard import duties? What if the cost to exporters competing against Japan’s subsidies to its farm sector were factored in as part of the equation? Would the CIMA indicate the real extent – or lack thereof – of access? The approach of an appropriately refined CIMA model could be applied for other countries, such as the full cost of exporting rice to the US or bananas to Australia. One could very well extrapolate and see the value of a CIMA for a host of other products, including canned sardines and fish products to the EU.
Indeed, the time may yet come when a comprehensive measure for market access, such as the CIMA, will become the preferred currency for trade negotiations.
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