Dealing with NTMs: Capacity building of companies

There is a growing concern regarding Non-Tariff Measures (NTMs) in the developing countries, including Bangladesh, as exporters and importers alike are affected by NTMs. The International Trade Centre (ITC), in its NTM business survey on Bangladesh, identified this growing concern. The organisation, based in Geneva, conducted the survey. The formal result of the survey will be released soon. However, primary outcome of the survey shows that concern on NTMs is rising among the business community of the country.
UNDERSTANDING NTMS: The basic problem with NTMs lies in the lack of proper understanding about the fundamental characteristics of the trade-related measures which are not related to tariff. It is because many business people as well as some experts fail to differentiate NTMs from the NTBs (Non-Tariff Barriers). Though NTBs are part of the NTMs, all NTMs are not NTBs.
UNCTAD's definition of NTMs is generally accepted all over the world. It says: "Non-tariff measures (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". The definition is very broad and, to some extent, vague. Nevertheless, UNCTAD's detailed classification comprises technical and non-technical measures, such as environmental protection measures and Technical Barriers to Trade (TBTs) as well as quotas, price control, exports restrictions and distribution restrictions. The classification, however, doesn't validate the rationale or adequacy of any form of policy measures having impact on international trade.  
On the other hand, NTBs are basically applications of any NTM to make export or import of any good difficult and troublesome. NTBs are deliberately trade restrictive to provide unfair protection to local industry like import ban and discriminatory treatment for local industries. For instance, when a country makes a certain labelling specification for importing a certain type of fruit drink, it is an NTM. But, by imposing different labelling specification for the same product only, it turns into an NTB.  
ITC has been conducting NTMs survey over 30 developing countries and 28 member-countries of the European Union. The survey on Bangladesh as well as some other countries has been completed. The completed surveys identified more than 21,000 trade obstacles, as reported by businessmen and traders of these countries.
In Bangladesh, the survey team initially contacted 1602 business entities and companies. Of these, 23 per cent refused to participate while some 15 per cent were excluded due to wrong contacts, non-availability, etc. Thus, 62 per cent of the contacted companies finally came under the survey. All 998 surveyed companies came under telephonic interviews and later 411 companies were interviewed face to face.  56 per cent companies are exporters, 17 per cent are importers and 27 per cent are both exporters and importers. 36 per cent companies are large, 26 per cent medium and 38 per cent small. Around 60 per cent of the companies surveyed are based in Dhaka, 32 per cent in Chittagong and rest in Khulna. The survey covered 13 sectors including textile, clothing, food, leather, basic manufacturers, chemicals and transport equipments. For exporters, destination of 42 per cent of their products is Europe, 34 per cent  Asia (excluding SAARC), 12 per cent SAARC region and 8 per cent North America. Other export destinations are Oceania, Africa and South America.
CORE FINDINGS: The survey finds that on average 91 per cent of Bangladeshi exporters are affected by NTMs. But sectors like food, leather, chemicals, basic manufacturing, electronics and textiles are effected by NTMs more (92 per cent and above) than sectors like clothing and woods (below 90 per cent). This is a critical finding as products like foods, chemicals and leathers are usually subject to stringent standards in the developed as well as many developing countries.  
 Again, 'most of the NTMs perceived as burdensome by exporters are partner (importing) country regulations', finds the survey. About 77 per cent burdensome NTMs are applied by partner countries while 23 per cent by home country (Bangladesh). Exporters also identified SAARC and Middle-East countries more difficult to access as these countries apply more burdensome NTMs. For instance, although Bangladesh's export to SAARC is only 2.0 per cent of its total export, the region shares 10 per cent of total NTMs faced by the Bangladeshi exporters.
According to the ITC survey findings, half of the burdensome NTMs originate from conformity assessment requirements, a process that are actually measures designed to assess whether products meet applicable technical regulations and standards of the importing country.  To put it simply, it is a process of testing and certification as well as any systematic examination of the extent to which a product fulfils requirements specified by law or by the government of the target market. So, the process is linked to the regulations and standards in line with which conformity is to be assessed. For instance, if an importer of Sri Lanka wants to check that the leather bag he ordered from a Bangladeshi supplier fulfils the required conformity (i.e. 100 per cent toxic-free), the importer needs to get a testing certificate issued by a recognised or accredited testing laboratory.
Another burdensome NTM, identified in the survey, are rules of origin and related certificate of origin. In fact, various rules of origin in different countries sometime make it difficult for the producers and exporters to comply with the requirements for the same product.
The other burdensome NTMs are: pre-shipment inspections and entry formalities (10 per cent), technical requirements (9 per cent) and charges, taxes and other para-tariff measures (4 per cent).
A major question is: why do the exporters find NTMs burdensome? According to the survey, 81 per cent exporters opined that procedural obstacles make compliance to regulations difficult. 12 per cent believed that regulations are too strict or difficult to comply with. But an interesting finding about procedural obstacle is that 86 per cent of these experienced by the exporters are caused by Bangladeshi agencies.
WAY FORWARD: Based on the survey, ITC provided a set of recommendations to deal with NTMs. It pointed out that most of the companies lack capacity to meet international requirements. There are also absence of proper national traceability system of food products, inadequate or insufficient testing and certifying agencies and knowledge gap on available quality related services.
To overcome these shortcomings, it recommended capacity building of companies, setting up national traceability system and strengthening the Bangladesh Standard and Testing Institution (BSTI) along with the Directorate General of Drug Administration (DGDA).
In this context, establishing an online reporting mechanism and NTM monitoring committee may be a worthwhile step to report trade obstacles faced by the companies.  Earlier, under the SAARC Trade Promotion Network (TPN), all SAARC countries were requested to set up an NTM desk in the leading trade bodies. So far, the desk is established in five countries-- Bangladesh, Bhutan, India, Nepal and Pakistan.  In Bangladesh, two desks were established -- one in Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) and another in Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI).   A 16-member policy advocacy group for dealing with NTMs for trade promotion in South Asia has also been formed in Bangladesh last month.
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