Non-tariff measures (NTMs) remain a major hurdle for exporters in the Philippines and other Asia-Pacific countries, with more than half of all interviewed firms reporting them to be burdensome and challenging, according to a newly published report.

 

Despite regional integration efforts that have seen reduced tariffs, increased connectivity, and harmonized regulations, many non-tariff barriers to trade persist, according to a joint International Trade Centre (ITC) and Economic and Social Commission for Asia and the Pacific (ESCAP) publication.

 

The research found that 55% of interviewed firms encounter difficulties with NTMs, which continue to pose serious challenges to exporters and importers in the region.

NTMs imposed by regional trade partners comprise exactly half of all reported NTMs. The most burdensome NTMs for exporters are foreign regulations (80%) rather than domestic regulations (20%).

NTMs are policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded or prices, or both. They include technical measures such as sanitary or phytosanitary (SPS) measures and technical barriers to trade or TBT measures, as well as non-technical measures such as rules of origin (ROO) requirements, licensing, and price controls.

Conformity assessment requirements to prove compliance with TBT or SPS measures account for an overwhelming 73% of all technical measures. Fumigation, labelling, inspection and tolerance limits account for most of the other technical issues reported.

 

Most technical requirements are deemed simply too complex or difficult to comply with. Product certification is associated with delays and, at times, the use of informal payments to speed up processing, while product testing is difficult because of the lack of access to accredited facilities, resulting in delays and high costs.

 

Almost half (47%) of the more difficult technical NTMs are regional. Other major markets, including the European Union and the United States, account for 26% and 14% of the cases, respectively.

In the Philippines, a major exporter of lower-value semiconductor and electronics products to the US, more complex original design manufacture (ODM) products are difficult for local SMEs to export because of technical obstacles in developing, testing, and certifying potential products, said the report.

 

Meanwhile, non-technical measures reported are largely related to ROO requirements, such as those linked to the Generalized System of Preferences (GSP or GSP+) programs of the European Union and the United States.

 

Exporters find ROO regulations burdensome largely due to associated procedural obstacles such as having to present many documents, high fees, delays, and informal payments while obtaining the required certificates of origin.

 

For example, garment-exporting countries with less vertically developed value chains find it difficult to comply with ROO and local content requirements. In the case of the Philippines, this hardship is largely due to the increased local use of imported textiles in their markets.

 

Procedural obstacles a drag

 

In addition, procedural obstacles in their home country add to exporters’ NTM struggles. The most common include time delays, the need to make informal payments or high fees and charges, lack of accreditation, lack of appropriate testing facilities, and difficulties obtaining trade and NTM-related information.

 

In the Philippines, the health department reportedly requires that imported household chemicals, including hydrochloric acid, must be highly regulated, entailing five to seven import permits, security escorts, and special storage.

 

“Since these chemicals are used as cleaning or finishing agents in many different sectors, including electronics, handicrafts and chemicals, these additional requirements can be very burdensome for those importing the product for uses other than bomb manufacturing,” the publication said.

 

Pre-shipment inspections and other border entry formalities, such as import permits or licenses, were likewise found to be problematic for importers in the region.

 

In the Philippines, importers must comply with a yearly renewed import clearance certificate that requires them to submit numerous financial documents and authorizations by different departments within Customs.

 

“As there are so many administrative obstacles encountered when complying with all these associated procedural obstacles, firms often end up with additional monetary penalties and delays of up to half a year,” the paper said of the Philippine situation.

 

“Notably, in this instance, even though the original purpose of the regulation is to curb smuggling and streamline the import process, the initiative ended up creating more red tape,” it further stated.

 

At the same time, the lack of capacity of authorities to properly enforce trade regulations in some countries has led to informal payments becoming a standard operating procedure for both importers and exporters. In addition, cultures of patronage, coupled with complex and often outdated regulations and customs clearance mechanisms, have reinforced this behavior.

 

“For instance, in the Philippines, a law requires the use of a customs broker to mediate transactions between exporters and customs agents, implying that there will always be an extra administrative layer of possible corruption and bureaucracy for all trade procedures,” reported the research paper.

 

It further observed that a common non-tariff measure includes customs valuations, which is “prone to bribe-seeking behaviour.”

 

“For instance, in the Philippines, the Bureau of Customs uses a 3-month rolling period methodology that overvalues the product by up to a hundred times the original price, significantly increasing import duties,” it said.

 

Streamlining procedures sought

 

The paper recommends streamlining trade procedures in the home country as a necessary step to enhance exporters’ access to neighboring markets.

 

“Asia-Pacific economies should look inwards to identify domestic opportunities for trade facilitation reform at an institutional level,” the report declared.

 

At the regional level, the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific (FA-CPT) is another important initiative.

 

“Its full implementation will not only reduce transaction time and costs but also increase regulatory compliance and enable the more direct engagement of small and medium-sized enterprises in international trade and cross-border e-commerce,” said the publication.

 

Published in February 2023, the ITC-ESCAP report entitled “Company Perspectives on Non-Tariff Measures in Asia-Pacific” is largely based on NTM business surveys conducted among over 9,300 firms in eleven Asia-Pacific countries. Aside from the Philippines, other participant-countries were Cambodia, Indonesia, Thailand, Vietnam, Kazakhstan, Pakistan, Kyrgyzstan, Bangladesh, Nepal, and Sri Lanka. Philexport News and Features

​

​