US urges PH to cut non-tariff measures

Published October 1, 2020, 5:00 AM

by Bernie Cahiles-Magkilat

The US government has urged the Philippines to review its mounting non-tariff measures (NTMs), which already reached 854, as these effectively restrict trade, lessen market competition, and make product’s prices more expensive, especially at this time of global supply chain disruption due to the pandemic.

Jenna Diallo, deputy director for economic development of the USAID (United States Agency for International Development), said at a webinar on Philippine Trade Policy Response Amid COvid 19: NTMs on food as essential item – fishery and aquaculture-based food that as tariffs are becoming irrelevant, NTMs are now being used by countries to restrict trade.

In the Philippines, Diallo said, a total of 854, non-tariff measures have been identified involving at least 37 issuing institutions.

She urged for collaboration with the key private sector and government stakeholders to “review the country’s non-tariff measures and move towards reducing the number, and improving measures that will remain.”

NTMs come in the form of discretionary and improper application measures such as sanitary and phytosanitary measures and other technical barriers to trade which may include extra licensing requirements duplicate of health certificates or distribution restrictions.

“In principle, restricting trade is bad for consumers because it restricts competition, thus keeping prices high,” she said.

Diallo said that USAID supports efforts to address trade barriers, especially during this COVID-19 pandemic, which has disrupted the normal flow of food products, affecting the global food supply chain.

“I hope that actionable measures will be identified to help ensure a stable food supply for the Philippines,” she said at the webinar.

“Globally tariffs have become less relevant as multilateral plurilateral and bilateral trade agreements have caused tariff rates to fall in many cases tariffs are now zero or near zero,” she said.

In the Philippines, she said, more than half of the tariff lines have most favored nation duty rates of between zero and 5 percent for the region, the Philippines has eliminated tariffs on approximately 99 percent of all goods from ASEAN training partners as a commitment under the ASEAN free, or after more relevant these days are non-NTMs.

“In many ASEAN meetings, it’s not uncommon to hear member states complaint on direct measures. As you know this refers to prohibition, conditions or specific market requirements that make importation or exportation of products difficult and costly,” she said.

Diallo stressed that NTMs imposed by a country can negatively impact its businesses and consumers and teams can hurt exporters in two ways. First, export nontariff measures add to the cost of doing business, and make it harder for exporters to tap international markets. Second, import non-tariff measures make sourcing of imported materials difficult.

Notably, she said, a high proportion of the goods for export or sell abroad have substantial import content. Diallo cited an OECD reported which estimated that the import content of the Philippines total exports was at 23.4 percent in 2016.

“And it’s not just export oriented businesses, companies that cater to the domestic market, also rely heavily on imports as input for finished products,” she added.

For instance, she said a small indigenous hub long weaving company in Isla Lilo who wants to take advantage of the ASEAN Free Trade Agreement and sell to Cambodia. That company not only has to compete with fabrics from other countries, and to satisfy Cambodia’s non-tariff measures, but they also have to satisfy the Philippines permit and clearance requirements imposed by domestic agencies before they’re even allowed to export.

She added that USAID is working to improve regulatory quality to enhance market competition, country competitiveness and contribute to higher levels of investment and trade, inclusive growth, and greater self-reliance.