Feb 19, 1991

NTMS IN ICS LOWER THIRD WORLD EXPORTS BY ABOUT $4.6 BILLION.

GENEVA, FEBRUARY 18 (BY CHAKRAVARTHI RAGHAVAN) – Third World exports valued at $25.6 billion are affected by explicit Non-Tariff Measures of one kind or another in Industrial Country markets and these NTMs have lowered Third World exports by $4.6 billion, according to the UN Conference on Trade and Development.

In a report (TD/B/1284) to the Trade and Development Board, the UNCTAD secretariat says that the methodology used to estimate the "losses" of Third World countries by the NTMs tends to underestimate the losses in certain circumstances, especially when the restraint covers imports from all sources.

The major product sectors affected are: seafood in Japan; sugar in the European Community, Japan and the U.S.; tuna and steel products in the U.S.; and agricultural products, consumer electronics, footwear and steel products in the EC.

About 68 percent of the imports from the Third World in these product sectors are covered by NTMs.

The NTMs, as the report puts it, "run the gamut from so-called anti-dumping and countervailing (AD/CV) duties to GATT sanctioned escape clause action and export restraints negotiated under the MFA, to extra-GATT voluntary restraints on steel products. They range from explicit measures such as import quotas and voluntary export restraints (VERs) to subtle customs procedures and health, safety and technical standards".

The estimates do not include restrictions on textiles and clothing exports, "one of the most protected" sectors in the ICs and governed by a "clearly discriminatory regime" against the export interests of the Third World.

The elimination or reduction of NTMs is one of the issues on the agenda of the Uruguay Round, which has made little progress. While the concessions on NTMs affecting individual countries and products in individual markets are subject to request/offer procedures of negotiations, other areas of negotiations involving changes or interpretations of GATT rules and codes, including the AD/CV measures which are used as a disguised protectionist measure, might well result in more NTMs against Third World exports if the demands and proposals of the ICs are accepted.

The negotiations for a safeguards agreement and how it should deal with "grey area" measures is another area which will have a bearing on the NTMs.

The report brings out that the EC has the greatest number of Harmonised Tariff System (HTS) categories with NTMs affecting exports of the Third World.

However for the EC (and Canada), the AD/CV duty actions are included among the NTMs and their effects while they are not included for Australia and U.S. The four have the greatest incidence of AD/CV actions.

(According to a separate report (TD/B/1282) the number of AD/CV actions initiated in the period July 1989 to June 1990 was slightly lower than in the previous 12 months. But the number of cases involving Third World countries remained stable in Canada and increased in the EC and the U.S. Consequently, the share of outstanding cases directed at Third World countries increased in both the EC and the U.S.A.)

By value, $12.5 billion worth of Third World exports to the EC are affected by NTMs. This is almost one half of the total Third World exports affected by NTMs.

Japan and the U.S. are the only other ICs whose imports from the Third World subject to NTMs exceed one billion dollars, though this figure would be exceeded if the incidences of AD/CV actions in the U.S. are taken into account. During 1980-1988, the U.S. had 473 ad and 282 CV actions.

As for the MFA restrictions, the report notes that studies suggest that for many Third World exporters the prices are roughly 25 percent higher as a result of the trade restrictions, including tariffs and MFA quotas.

The rents associated with these higher prices are split almost in equal proportions between Third World exporters who receive quota rents and IC governments, which collect tariff revenues.

As a result of the MFA, in comparison with rates of growth in consumption of importing countries, those Third World countries whose exports are restrained experience slower growing export quantities but faster growing export revenues. The unit value benefit from upgrading and quota rents has more than offset the slow growth in export volumes.

But the quota rents received, estimated to be in the range of 15 percent per unit value for textiles and 25 percent per unit value for apparel, are small compensation for the very large sacrifice in export volumes resulting from the MFA.

The experience of non-restrained Third World exporters has been rapid growth in export quantities but only modest increases in unit values.

Over time as buyers and producers respond to the economic incentives created by the MFA, it could be expected that the share of imports subject to restraint would increase and quotas would become increasingly binding.

"Thus, as a share of the total market, the primary beneficiaries of the MFA are domestic producers in the import restraining countries rather than non-restrained developing country exporters".