Countering non-tariff barriers

Tanu Singh's book demystifies the World Trade Organization jargon on tariffs and is a valuable source of information for both industry and academia

Breaking Non-Tariff Barriers

Author: Tanu Singh

Publisher:  Pentagon Press

Pages: 232 

Price: Rs 995

In the world of trade, tariffs and non-tariff measures (NTMs) are tools used by countries to generally protect domestic industry against foreign competition. As tariffs are transparent they are easy to handle, while NTMs are a complex set of regulations, licensing, testing, subsidies, standards, packaging, guarantee certification and so on and are hard to fathom. Sound knowledge of NTMs for businesses helps navigate markets by way of better compliance. Of the few experts on the subject in the country, Tanu Singh brings to bear a pragmatic understanding of NTMs, which she has lucidly captured in her first book Breaking Non-Tariff Barriers. Her ability to unravel its complexity comes from her long stint in the Department of Commerce where she negotiated NTMs chapters in Free Trade Agreements (FTA) with several countries in close consultation with the industry.

The book demystifies the World Trade Organization (WTO) jargon on NTMs as it seeks to explain the WTO agreements on the sanitary and phytosanitary (SPS) agreements relating to food and the technical barriers to trade (TBT) agreement relating to products. The national security exception clause provided under GATT Article XXI recognises the WTO members’ right to implement certain measures, including SPS/TBT measures, beyond global standards, ostensibly to protect human, plant, animal, environment and so on. The developed countries are known to be effectively using NTMs, taking advantage of the exceptions provided in the WTO rule book, contrary to the spirit of free and fair trade they champion. Since the adoption of these measures is voluntary and not binding under WTO, it makes it harder for developing countries to challenge them for lack of consistency, except on the grounds of violation of the principle of non-discrimination on imports of like products.

To illustrate the dilemma of developing countries to overcome NTM impediments, the author elaborates the European Union regulation REACH (registration, evaluation, authorisation and registration of chemicals) that puts onerous burdens on exporters of chemicals and pharmaceuticals by seeking numerous data on compliances. Exporters of organic products also face a similar ordeal of having to prove that their products are free from contamination. Further, when developed countries tweak their regulation to distort exporters’ conformity, it involves the preparation of fresh documentation that adds to cost and discourages exporters. Ms Singh suggests joining the Pharmaceutical Inspection Cooperation Scheme (PICS), an informal collaboration among countries with common standards, to overcome these hurdles. As increasingly non-trade issues such as environment, labour and gender are creeping into global trade, the author alludes to early preparation with foresight to tackle them.

The author has taken great pains to present chapter-wise NTMs of other countries in sectors of interest to Indian exporters, including in automobiles, capital goods, chemicals, cosmetics, organic products, pharmaceuticals, textiles and toys. This is useful information for the industry to frame strategies to export to developed markets. The author observes that India needs to diversify its export destination, beyond only seven countries to which currently 40 per cent of its exports are targeted. The FTA route could be one way to reach new markets, but Ms Singh suggests prudence while negotiating FTAs with developed countries, which are known to be deceptively protecting their markets with NTMs and giving nothing in return. This pitfall could be avoided, she asserts, by way of entering into mutual recognition agreements (MRAs) with partner countries to balance India’s trade interests.

The book draws attention to the importance of robust regulation and effective enforcement to prevent countries like India from becoming dumping grounds for imports from countries that promote exports with hidden subsidies. Such an approach has a dual purpose of boosting exports. India’s record on regulation at only 371 products so far is weak and, similarly, work on standards ought to be more thorough. The Bureau of Indian Standards (BIS), a national standard-setting body established under the BIS Act 2016, has developed standards on 20,000 products but only half are harmonised to international standards and much of the exercise is fraught with enforcement challenges. Developing a robust domestic regulation requires diligent planning and perseverance at all levels. Holding capacity-building initiatives for the industry in specific sectors regularly could be helpful and, through seminars and conferences, awareness on NTMs could be created. The first Standards Conclave held in 2016 has come a long way in so far as it is now being held at the central and regional levels annually. These activities should ideally evolve into actionable programmes of respective ministries or departments with each working on developing regulation on specific sectors. We should also remain open to learning from other countries’ best practices and their standards.

Ms Singh’s book is a good source of information on NTMs for both industry and academia. Its shortcoming is lack of advocacy for developing a strong domestic regulation for exports where much work remains to be done if India has to produce world class products. Our industry’s attitude needs to evolve from being import-defensive to export-oriented. More importantly, India’s trade policy would need to be in tune with the prime minister’s visionary approach to promoting “zero defect, zero effect” manufacturing across the country.

The reviewer is a serving Indian Foreign Service officer