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Non tariff barriers in trade for protectionism

Exports compose ample role in liberalized economies. But Pakistan export growth has performed unimpressively over the last years, following the similar global trade patterns. Pakistan succeeded World Trade Organization in 1995 after GATT (general agreement on tariff and trade) ends; but country has been bearing continues trade deficit by importing manufactured and secondary goods since a decade. On the other hand, country exports concentrated merchandise including textiles, agriculture products, and some semi-manufactured goods in spite of tariff, non tariff and protectionist measures by its trading partners.

Pakistan’s five major export markets shuffled during recent past to USA, China, UK, Afghanistan, and Germany. In 2017, Pakistan exports to this crowd worth US$ 9.4 billion. Recent past also witnessed strategic turn of Pakistan to join new trade partners China, Afghanistan, Turkey, and Russia. In the same wake of regional connectivity, China-Pakistan Economic Corridor(CPEC) is likely to play vital role in not only establishing economic relations between China and Pakistan but also with Central Asian and other neighboring regions. The emerging block will bring new markets as well as challenging non-tariff barriers e.g. technical barriers to trade (TBT), sanitary and phytosanitary (SPS) measures, quotas, consumer preferences, and other quality and standards.

The SPS and TBT agreements under WTO regime are declared as non-discriminatory and principally do not create unnecessary hurdles to trade. The agreements used to avoid unnecessary barriers to trade and use of international standards but to smoothen trade flows favorable for consumers and importers. The agreements provide good trading environment and encourages the WTO members to base their measures on international standards by means of facilitating the trade. SPS and TBT measures only apply to merchandise. These measures are monitored and confirmed by the respective governments to ensure the food safety for consumers and also to avoid unnecessary risks. SPS measures are related to safety of human, animal and plant life health. Exporters and industrialists in Pakistan need to revive the contemporary quality standards prior to enter into emerging trading block.

Contemporary challenges in trade also hampered Pakistan to its limited export markets – scattered across the globe. In 2017, value of Pakistan export was $21.9 billion largely concentrated on textiles and apparel. Pakistan export to Afghanistan was worth $1.37 billion in 2016 which gradually increased to $1.39 billion in 2017. Similarly in Asia, export increased to China from 1.6 billion in 2016 to 1.5 billion in 2017; to Russia from 144 million in 2016 to 130 million in 2017 and to Turkey from 236 million in 2016 to 327 million in 2017. The regional trade is expected to increase manifold in future as soon as plurilateral strategic and economic ties improve with emerging block. An increase of total exports of Pakistan from 20.53 billion in 2016 to $ 21.88 billion in 2017 is an affirmative concern for industrialist and exporters.

In the context of CPEC, Pakistan and China’s inter-regional investment and trade will bring prosperity for both partners. Under-construction CPEC prioritized early harvest projects which have been completed, whereas medium to long-term components of CPEC are also successfully in progression phases. Belt and Road Initiative (BRI) is fetching investment and employment horizons; but Pakistan trade potential to region depends on physical connectivity and hostile quality standards. Moreover, firming up of regional institutions with a view to encourage regional supremacy and to advance national institutional capability to implement regional strategies will stem up Pakistan’s export.

 

There are increasing concerns from the importing countries about protectionism and, Pakistan is facing tough competition from similar economies. Moreover, Pakistan’s image of an exporter of low quality products is restricting the placement of orders for high quality (value-added) products. Furthermore, the technical regulations and standards are gaining much importance. Pakistan’s potential exporters are lacking to demonstrate compliance with these world class standards and technical regulations through conformity assessment procedures. These standards and technical regulations differ across countries and they may act as technical barriers in the trade flow. Among all other barriers, SPS and TBT are the most difficult barriers to quantify and to examine its trade restrictive effects. These non-tariff barriers (NTBs) are often imposed just to reduce the quantity of imports. The increasing use of such NTBs by developed countries is a serious concern for developing countries including Pakistan. It helps the exporters and manufacturers to produce according to the required standards. The certain SPS and TBT measures may act as trade restrictive if neglected, or trade promoting if followed.

SPS and TBT work as a contemporary substitute to tariff rates and became more substantial as conventional trade barrier, like tariff rates phased out gradually through multilateral negotiations under WTO. Enforcement of TBT and SPS measures affect Pakistan exports in a positive way and to protect exporters from damage. Raising the level of awareness and enforcement of international standards by the Government can result in significant gains and quality improvements.

According to WTO rules, countries are allowed to take on the guidelines of the SPS and TBT agreements in order to protect human, animal and plant health, as well as environment. TBT and SPS measures may act as a reason of sluggish trend of exports for Pakistan as many of the potential exporters are unaware regarding these measures.

Importance of international quality standards in global trade with increasing liberalization and globalization is mounting as economy opens up. Due to modified technology and industrial structures which are becoming more intensive, the nature of competitiveness is changing as country has explored new export markets. As production process becomes more efficient with the use of modern technology it can reduce the vulnerability to international market fluctuations. Knowledge factor is also playing a vital role in modern production process and can proliferate competitiveness of countries. Risk taking innovations in the production process and to access emerging markets through creative marketing can impact exports in favorable way for Pakistan.

Government could modernize and redefined the policy, regulations and legislation development process. Government’s objective could be to increase the productivity in all export sectors as per Strategic Trade Policy Framework (2015-18)and to introduce new commodities and explore new markets to avoid commodities and market concentration. Focus of policy makers should be to improve the standards, regulations and assessment of the products exported to the key partners to boost the export sectors. Domestic exporters and manufactures may keep themselves better equipped and updated for enforcement of SPS and TBT. Despite having good strategic relations, there is a great potential for Pakistan exports in the markets of Afghanistan, UAE, Iran, Russia, China and Turkey. Pakistan may focus on the markets where it has great potential for exports and to generate handsome foreign reserves.

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