The economies of the European Union (EU) have suffered since the financial crisis of 2007 a stagnation in their production growth. Rising inequalities and precarious jobs accentuate a crisis that has no prospect of improving in the short term. Confronted with stagnation in domestic consumption, exports do not seem to be helping the EU to emerge from the economic crisis either. Thus, the euro area net exports are expected to remain a drag on growth in 2016 before turning neutral in 2017.
In recent years, the EU has made efforts to establish Free Trade Agreements not only with African countries via the Economic Partnership Agreements (EPAs) but with many other economic regions like the States (TTIP) and Canada (CETA). The EU promotes Free Trade Agreements emphasizing the benefits of reducing tariffs in international trade to boost economies. However, international trade is not only conditioned by tariffs barriers. The Free Trade Agreements are submitted to many other complex Non-tariff barriers (NTBs) that restrict imports and exports according to national and regional regulations. In this context, for example African goods that are exported to the EU must meet certain legal and administrative measures before being shipped to the EU.
What are these Non-Tariff Trade Barriers?
Non-Tariff Barriers are a jigsaw of measures related to direct or indirect economic policies. Although the NTB are not only tax measures, they increase the final cost of goods and services. To understand the NTB better they can be summarized in two major groups.
First, there is a group of technical barriers that – in general terms – guarantee the quality of final products, protect consumers’ health, ensure people’s food security, and whose production processes respect the environment. The technical barriers include Sanitary and Phytosanitary (SPS) measures and are related to the health characteristics and requirements of the goods. Once the goods fulfill these requirements then they can be traded. In the case of the EU, there are common standards for all products imported into the European market but each member state can include some specificity according to national legal regulations.
Second, there is a group of non-technical barriers that do not relate to the characteristics of the foods but to the trade and administrative requirements that all export goods must fulfill. These include a long list of requirements, inspections for customs authorities, licenses, quality controls, quotas and other protectionist rules related to national export/import trade policies. In this group of measures there are some very important measures affecting African countries such as rules of origin, intellectual property, quotas, antidumping measures and price control measures.
The complexity of these measures makes for difficult trade relations between countries and regions. Although developed economies are better prepared to deal with such legal regulations, it is hard for developing economies to fulfil them. In absolute terms, three out of every four Africans participate in the agriculture industry, but African farmers lack the technical expertise to be sure that their exports meet the strict sanitary and phytosanitary (SPS) standards of major markets. Whereas in Europe there is a long tradition in the implementation of these measures and they are included in their production processes, most African economies lack adequate structures to certify their products.
So, when we talk about the negative effects of the EPAs between the EU and African regions, in the first place we mean the loss of important tax revenues and the consequent shrinking of government funds. But also, and not least, the EPAs represent an increase in other non-tariff burdens that are an additional difficulty for African countries. NTBs are often a more significant barrier to trade, and hence to exports into the EU, than are tariffs, especially for small and medium sized exporters.
These administrative, sanitary and phytosanitary measures are necessary to modernize the economies of developing countries. These standards can be good if, for instance, they are designed to prevent conflict minerals coming on the market or if they prevent products from deforested areas from entering the EU, or if they forbid GMOs. But now they are used as protectionism and it is unfair competition. The processes demanded by the EU sometimes are a threat to domestic producers and infant industries in African countries as well as to industrialization and regional trade. The Sanitary and Phytosanitary measures can be good to protect consumers, but cannot be applied at the expense of the African countries. In this regard, African countries have greater difficulty in complying with these non-tariff measures because they lack the necessary infrastructure.
Therefore, the non-tariff barriers are not direct taxes on traded goods but export/import trade policies that contribute de facto to restriction on international trade of goods originating in or destined to other countries or commercial regions. While tariffs may be calculated beforehand, the non-tariff barriers are more difficult to determine in advance and often increase the commercial value of goods and hamper access to foreign markets. The NTBs may limit the benefits that developing countries can derive from trade pacts such as trade preferences granted by developed countries for products from developing countries.
Not only are countries that accept EPAs bound to lose about 80% of their tariff revenue, they also face compliance costs due to NTBs. All NTBs are commodity-specific. However, local industries are not sufficiently equipped to deal with such standards for industrialized markets if they are not accompanied by sufficient, well targeted assistance.
The EPAs require clear and obvious additional measures to facilitate compliance with non-tariff barriers, not a symbolic “aid” that will not be effective. Developing economies require time to adapt to international standards and these must be gradually acquired under their own laws, not imposed by developed countries.