By: Scott Bouvier, Chen Bing, Mark Schaub,Martyn Huckerby, Ramon Garcia-Gallardo and Yixin Gong  King & Wood Mallesons

Why is reducing non-tariff measures a matter of global concern?

On a global scale, there has been a tendency towards freeing up trade and removing obstacles, as highlighted by the recent spate of international free trade treaties. Clear and measurable benefits of these treaties have been the reduction or elimination of tariffs.

However, as recognised by the United Nations Conference on Trade and Development (UNCTAD), non-tariff measures (NTMs) continue to present major challenges for exporters, importers and policymakers. Defined as “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”, there is a wide spectrum of NTMs used in international trade today.

In this article, we share our insights on the challenges of NTMs, drawing on the experience and expertise of our Australia, China and Europe-based offices, each of which regularly advises on international trade matters. Despite the difficulties created by NTMs, the outlook is not all bleak. Procedures for addressing the challenges of NTMs have been included in recently agreed international trade treaties and advances are being made at the domestic level to alleviate the burdens of NTMs.

The challenge of NTMs

With the world’s growing demand for food and changing dietary preferences, particularly in Asia, improving the efficiency of international trade by reducing the burden of NTMs is becoming increasingly important.

NTMs currently present significant legal and regulatory obstacles to market access, hurting the competitiveness of exporters and delaying (and sometimes even preventing) businesses from entering into new markets and taking advantage of new opportunities. Set out below are some examples we have observed in recent years.

Sanitary and phytosanitary (SPS) measures

SPS measures protect human, animal, and plant life and health. While these should be based on the WTO SPS Agreement, international standards, and recommendations founded on scientific principles, countries can impose additional onerous SPS measures on agri-food exports.

From a European perspective, Australia has a particularly strict import regime for live cattle, bovine meat and meat products. These requirements are stricter than the agreed international standards set by the World Organization for Animal Health (OIE) and significantly delay imports of bovine products.

Technical barriers to trade (TBT)

TBTs have increased considerably over the past years as governments worldwide introduce more regulatory requirements to address health, safety and environmental concerns.

The EU’s approach to beef imports is an example that highlights the impact of TBTs combined with non-technical measures like import quotas. Specifically, the EU does not accept US beef raised with growth-promoting hormones, and only allows high-quality beef from cattle that has not been raised with growth-promoting hormones (with a duty free import quota of 48,200 tons and a Hilton high quality grassfed quota of 11.500 tons, the latter of which it shares with Canada).

Other non-technical NTMs

The sheer number and complexity of identifying all relevant NTMs is a challenge in itself. China, in particular, increasingly uses country-specific standards which foreign competitors find hard to meet. These requirements are often very lengthy and involve non-transparent application processes. For

example, to import Australian infant formula to China, there are about 18 registrations, approvals, filings and other sets of requirements that must be obtained or satisfied by manufacturers, exporters and importers (as applicable).

These requirements are spread across about 30 pieces of Australian and Chinese legislation, regulatory instruments and administrative measures, and certain licences and permits can be required for each shipment. There are also additional legal obstacles to selling goods in China.

Treatment of NTMs under international treaties and domestically

There is widespread dissatisfaction about the legal and regulatory trade obstacles presented by NTMs and a universal call for their reduction, but implementation of this objective is difficult. Many NTMs are legitimate policy measures, serving both trade and non-trade purposes. Moreover, each country has its own interests to protect and different economic uncertainties and political sensitivities to navigate. The negotiation and implementation of international treaties takes time and the balancing of concessions necessarily means that not all NTMs can be addressed at once.

In this context, it is encouraging that many of the recently agreed treaties set up specialised committees to facilitate international discussions about NTMs and that countries have instigated domestic processes to address the challenges caused by NTMs. While it is not possible to cover all international treaties (agreed or currently being negotiated) or the domestic advances that have been made, we have highlighted some key developments below.

China-Australia Free Trade Agreement (ChAFTA) –in force since 20 December 2015

ChAFTA does not remove any specific NTMs, but does introduce a specific mechanism to review and address NTMs on a case-by-case basis, as raised by Australia or China. This aims to enhance co-operation, increase information exchange and consultation, and mutual technical assistance. ChAFTA also contains specific provisions relating to services, which may indirectly benefit the agri-food sector (for example in relation to education).

Trans-Pacific Partnership Agreement (TPP) –concluded on 5 October 2015, but not yet in force

The TPP is a multilateral trade agreement between 12 countries including Australia, Canada, Chile, Japan, Singapore and the US. Similar to ChAFTA, the TPP also introduces a mechanism allowing a party to request ad hoc discussions on specific NTMs. TPP parties have also agreed to: eliminate agricultural export subsidies, work together in the WTO to develop disciplines on export state trading enterprises and export credits, and limit the timeframes allowed for restrictions on food exports so as to provide greater food security in the region.

EU-China Investment Agreement – negotiations are ongoing

In April 2016, the parties held talks which covered specific issues affecting trade in goods and services, including various NTMs. On TBTs in particular, discussion focused on legislative approaches adopted in China’s standardisation reform and its compulsory certification scheme. The EU expects that the reform will lead to more transparent and stakeholder driven processes.

Australian Government currently undertaking legislation simplification

Acknowledging that there are currently over 61 pieces of primary and delegated legislation governing the

export of agricultural products in Australia, the Australian Government is seeking to simplify the legislative structure so it is easier to understand and administer. The focus of this reform process is domestic. However, the Australian Department of Agriculture and Water Resources is also running workshops on NTMs with industry members, Departmental officers and the Department’s overseas counsellors.

The EU’s Market Access Strategy

Removing NTMs forms part of the EU’s Market Access Strategy. Two instruments established under the Strategy are the “Market Access Database” (which provides free online information on market access conditions) and the “Market Access Partnership” (which brings together the European Commission, national governments and businesses in an effort to enforce global and bilateral trade rules).

Ongoing global reform

Progress is being made, but the complexity and technical nature of NTMs require ongoing reform and discussions both domestically and on a global scale. To ensure that the trend towards removing trade barriers continues, we urge industry participants to engage with government authorities.

It is also important that future treaty negotiations focus on adhering to applicable WTO agreements on NTMs, facilitating regulatory co-operation and coherence, encouraging the adoption of international standards, ensuring that no new regulatory barriers are introduced and promoting the transparency and accessibility of information about existing NTMs.