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MARÍA CAMILA GARCÍA , con C.C. No 1 • 0 2 0 . 7 4 3 . 9 00
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PROPOSAL FOR THE IMPLEAAENTATION OF A NTAtó EVALUATION SYSTEM IN COLOMBIA
Tesis doct or al cual :
Tr abaj o de grado
(por f avor señal e con una " x " las opciones que apl i quen) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA TI Pr emi o o di st i nci ón: Si No
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De conf or mi dad con l o est abl eci do en e l ar t ícul o 30 de l a Ley 23 de 1982 y e l ar t ícul o 11 de l a Deci si ón Andina 351 de 1993,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA "Los der echos mor al es sobr e el t r abaj o son pr opi edad de l os aut or es", los cual es son i r r enunci abl es, i m pr escr i pt i bl es, i nembar gabl es e i nal i enabl es. En consecuencia, la Pont i f i ci a Universidad Javeriana est á en la obl i gadón de RESPETARLOS Y HACERLOS RESPETAR, para l o cual t omar á las medidas cor r espondi ent es para gar ant i zar su obser vanci a.
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TÍTULO COMPLETO DE LA TESIS DOCTORAL O TRABAJO DE GRADO
PROPOSAL FOR THE IMPLEMENTATION OF A NTMS EVALUATION SYSTEM IN COLOMBIA
SUBTÍTULO, SI LO TIENE
AUTOR O AUTORES
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GARCIA JIMENEZ MARÍA CAMILA
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DESCRIPTORES O PALABRAS CLAVE EN ESPAÑOL E INGLÉS
Son los t érminos que def inen los t emas que ident if ican el cont enido. (En caso de duda par a designar est os descr i pt or es, se r ecomi enda consul t ar con l a Secci ón de Desar r ol l o de Col ecci ones de l a Bi bl i ot eca Alf onso Borrero Cabal S.J en el cor r eo bi bl i ot eca@j aver i ana. edu. co, donde se l es or ient ar á).
ESPAÑOL INGLÉS
Medidas no Arancelarias Non Tariff Measures
Evaluación de Impacto Regulatory Impact Assessment
Reforma regulatoria Regulatory Reform
Comercio Internacional International Trade
RESUMEN DEL CONTENIDO EN ESPAÑOL E INGLÉS
(Máximo 250 palabras - 1530 caract eres)
Las Medidas No Arancelarias (MNAs) se han convertido en el instrumento de política comercial preferido de los gobiernos para afrontar temas de interés público y para disfrazar intenciones proteccionistas al imponerlas como barreras al comercio. En la última década la aplicación de MNAs ha exhibido un aumento significativo, pudiendo considerarse como una señal de cómo los esfuerzos proteccionistas pasaron de los aranceles a la adopción de MNAs. Esta situación ha llevado a que los organismos internacionales se enfoquen en promover agendas de racionalización del uso de estas medidas para garantizar que estén protegiendo obj etivos legítimos reconocidos por la comunidad internacional. Una forma de garantizarlo es a través de la introducción de sistemas de evaluación regulatoria para evaluar los posibles efectos de las MNAs antes que sean expedidas.
PROPOSAL FOR THE IMPLEMENTATION OF A NTMS
EVALUATON SYSTEM IN COLOMBIA
MARÍA CAMILA GARCÍA JIMÉNEZ
Director:
ANDRÉS DE LA CADENA
PONTIFICIA UNIVERSIDAD JAVERIANA
ABSTRACT
NTMs have become the preferred tool for policy-makers to address issues of public interest, but
also to establish disguise barriers to trade and protect their domestic industries. In the last decade
the application of NTMs has shown a significant increase, which could be a signal of how
protectionist efforts have passed from the application of tariffs to the adoption of NTMs. This
situation has lead international organizations to promote NTMs-streamlining agendas in order to
guarantee that when applied, those measures are in fact pursuing legitimate objectives
recognized by the international community. A way to ensure such effort is by introducing
regulatory impact assessment (RIA) in the regulatory systems to evaluate the possible effects of
the application of a NTM before introducing it to the legislation. This paper proposes a toolkit
for the adoption of RIA in the process of creation of NTMs, for the government to assure that
they would not impose barriers to trade and would support economic, social and environmental
welfare.
Key words: NTMs, RIA, regulatory reform, international trade.
NOTA DE ADVERTENCIA
“La Universidad no se hace responsable por los conceptos emitidos
por sus alumnos en sus trabajos de tesis. Solo velará por que no se
publique nada contrario al dogma y a la moral católica y por que las
tesis no contengan ataques personales contra persona alguna, antes
CONTENTS
INTRODUCTION ... 9
CHAPTER 1 – DEFINITION, CLASSIFICATION AND IMPACT OF THE NTMs ... 12
1.1. Definition of NTMs ... 12
1.2. Classification ... 14
1.3. Data analysis ... 16
1.3.1. Frequency index and coverage ratios ... 17
1.3.2. Degree of regulation ... 20
1.3.3. NTMs and Tariffs... 22
CHAPTER 2 – COLOMBIA’S CONTEXT REGARDING NTMs ... 25
2.1. Colombia’s regulatory system on trade policies ... 25
2.1 Issuing agencies and main NTMs ... 26
2.1.1 I-TIP database ... 26
2.1.2. WITS ... 27
2.1.3. Data analysis ... 28
2.2. Disputes raised against Colombia ... 38
2.3. Final remarks ... 42
3. IMPACT EVALUATION ... 44
3.1. Principles for regulatory reform ... 44
3.1.1. Recommendation of the Council on Regulatory Policy and Governance ... 46
3.1.2. Colombia’s evaluation recommendations by the OECD ... 52
3.2. Existing evaluation methods ... 54
3.2.1. Methods used for the evaluation of the cost of the problem ... 55
CHAPTER 4 – PROPOSED TOOLKIT FOR IMPACT EVALUTION ON NTMS ... 59
4.1. Present status on RIA systems’ implementation ... 60
4.2. Location of the Evaluation Team ... 61
4.3. Evaluation Team functions ... 66
4.4. RIA system stages... 68
4.4.1. Stakeholder’s input ... 69
4.4.2. Regulatory Agency’s input ... 72
4.4.4. Recommendations ... 79
4.4.5. Ex post evaluations ... 81
4.5. Final remarks ... 82
CONCLUSIONS ... 84
ABBREVIATIONS
AD Anti-Dumping
AVE Ad-valorem equivalent
FTA Free Trade Agreement
FAO Food and Agriculture Organization of the United Nations
GATT General Agreement on Tariffs and Trade
GMO Genetically modified organisms
GNTB Group of Eminent Persons on Non-Tariff Barriers
ICA Colombian Agricultural Institute
IMF International Monetary Fund
INDUMIL Colombian Military Industry
INM National Institute of Metrology
INVIMA Institute for the Surveillance of Foods and Drugs
ITC International Trade Center
I-TIP Integrated Trade Intelligence Portal
MNT Non-Tariff Measure
MCIT Ministry of Commerce, Industry and Tourism
MAST Multi-Agency Support Team
NGO Non-Governmental Organization
NTB Non-tariff Barrier
NTM Non-tariff Measure
OECD Organization for Economic Co-operation and Development
PSI Pre-shipment Inspection
QALY Quality-adjusted life years
RIA Regulatory Impact Assessment
SNC National Quality System
SPS Sanitary and Phytosanitary
SIC Supervisory Authority for Industry and Trade
TBT Technical Barriers to Trade
TRAINS Trade Analysis and Information System
UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNIDO United Nations Industrial Development Organization
WTO World Trade Organization
LIST OF FIGURES
CHAPTER 1
Figure 1.1 Frequency index and coverage ratios by
chapter in all 26 countries
…….18
Figure 1.2 Frequency index and coverage ratios by
chapter, by region
…….18
Figure 1.3 Frequency indices and coverage ratios, by
country
…….19
Figure 1.4 Number of products affected by a number of
NTMs chapters
…….22
Figure 1.5 Frequency index and coverage ratios versus
tariffs
…….23
CHAPTER 2
Figure 2.1 Colombian agencies issuing NTMs in the
period 2009 – 2013
…….29
Figure 2.2 Objectives of TBT measures …….31
Figure 2.3 Objectives of SPS measures …….32
Figure 2.4 Number of AD measures applied by
Colombia between Dec. 2004 – Jun. 2013
…….36
Figure 2.5 Application of licenses by Colombia (2006
to 2011)
…….37
Figure 2.6 Number of disputes acting as respondent …….40
Figure 2.7 Number of disputes by WTO-Agreements
acting as respondent
…….41
Figure 2.8 Number of disputes by WTO-Agreements
by region
…….41
CHAPTER 4
Figure 4.2 RIA’s system …….67
Figure 4.3 Review process stages …….81
LIST OF TABLES
CHAPTER 1
Table 1.1 2010-MAST Classification …….15
CHAPTER 2
Table 2.1 Measures subject both to TBT and SPS
measures
…….32
CHAPTER 4
Table 4.1 Some Colombian Trade Associations …….69
Table 4.2 Elements for the design of the consultation
stage
…….71
Table 4.3 Sources of the problem addressed by the
proposed regulation
…….75
Table 4.4 Alternatives to the proposed regulation …….75
INTRODUCTION
The 21st century is recognized in the field of international trade as the time of Non-Tariff
Measures (NTMs). In the past, countries used to control their trade rates through the
establishment of high tariffs in order to, among other reasons, protect and benefit their domestic
industry. That situation was addressed by trading partners especially in the grounds of the World
Trade Organization’s (WTO) forums, discussions and debates since it was the obvious way to
hinder free trade on an international level; the result of such discussion was the adoption of
tariffs schedules by each of its members that were supposed to lead to a total liberalization of
trade. Not being this enough, countries wanting to establish beyond WTO-commitments started
to negotiate on a bilateral or multilateral basis concluding with the signature of multiple Free
Trade Agreements (FTAs) whose target was to eliminate tariffs.
With the problem of tariffs almost solved, the getaway applied by different governments to
protect themselves from trade liberalization has been through the imposition of NTMs, “The
continual decline of tariff rates as the result of the eight GATT rounds of multilateral trade
negotiations (MTN) has increased the relative importance of NTSs both as protection and as
regulatory trade instruments. With the reduction in tariffs, non-tariff barriers are increasingly
becoming front-stage market access concerns” (UNCTAD, 2005, Pp. 4). NTMs provide means
for policymakers to address issues of public interest and concern, such as consumer’s health;
despite this, this new trend has raised the concern of international organizations who monitor
international trade because the proliferation of these type of measures may show that they are in
fact being used to “act as barriers to trade and are put in place for protectionist purposes” (Cadot,
Evidence of recent studies show that Technical Barriers to Trade (TBT) measures affect 30% of
international trade, constituting the principal NTM applied among countries; Sanitary and
Phytosanitary (SPS) measures affect 15% of international trade, while covering 60% of
agricultural products; quantity control policies affect 20% of international trade, protruding the
use of non-automated licenses (Nicita, 2013, Pps. 7-9). These are just preliminary numbers of the
real impact NTMs have on trade relations nowadays but that nonetheless demonstrate “the
presence of correlation between the use of NTMs and traditional forms of trade policy. This may
indicate that NTMs have been used, at least to some degree, as substitutes to tariffs in order to
continue protecting key economic sectors in spite of the tariff liberalization of the last 10 years”
(Nicita, 2013, Pp. 4).
The problem is that NTMs can endanger the competitiveness of domestic industries instead of
helping them, contribute to the raise of the cost of living, and discourage small and medium
enterprises (SMEs) to apply diversification efforts. All these in addition with a possible increase
of food staples and household consumer products, accelerating and strengthening economic
inequity (Cadot, 2012, Pp. 10).
Due to the aforementioned consequences of NTMs’ proliferation, worldwide efforts have been
endured by different international organizations such as the WTO, the Organization for
Economic Co-operation and Development (OECD), and the United Nations Conference on Trade
and Development (UNCTAD). They have attempted to provide governments assistance and
toolkits with the purpose of helping them establish ways and procedures for the review and
improvement in the adoption of NTMs, encouraging them to “address the NTM agenda from
domestic competitiveness and poverty perspectives, rather than from a mercantilist standpoint of
The purpose of this paper is to provide a toolkit for the review and examination of trade policies,
to help governments determine whether they are really following justified objectives or simply
constitute a trade barrier. The initial idea is to indicate which may be the best method to make
such evaluations, what the procedure must be, and the basic structure of the review system.
Nonetheless the implementation of such a system implies the identification and realization of
administrative reforms along with infrastructure issues; these elements are not going to be
covered by the present papers, although such analysis could be developed in future
investigations.
The paper is organized as follows: the First Chapter contains the relevant information about
NTMs in order to understand what they are, their classification, and some preliminary results of
the most recent study of the status of NTMs in a global context. The Second Chapter illustrates
the context of NTMs in Colombia, defining which are the agencies responsible of issuing such
policies, the notifications the government has made regarding the implementation of NTMs, and
the disputes in which Colombia has been involved due to the imposition of such measures.
Afterwards, Chapter Three addresses the importance of regulatory reform, which are the
guidelines and principles to be followed when adopting a regulatory reform effort, the role of the
adoption of RIA systems and describes which are the existing evaluation methods being used.
Finally, Chapter Four develops the proposal of an impact review system for Colombia,
CHAPTER 1 – DEFINITION, CLASSIFICATION AND IMPACT OF THE NTMs
NTMs are important because they have become a common tool for policy-makers to address
their domestic trade issues in a time when the application of tariffs has been left behind, “Not
only have these measures become more visible as tariffs have declined significantly trough
successive multilateral trade negotiations but they have been used more extensively by
governments to attain the protectionist goals formerly achieved with tariffs” (Baldwin, 1984, Pp.
123). Nonetheless keeping track of the quantity of NTMs applied by countries and their effects
on the economy is a difficult task due to the complexity of identifying if a measure is considered
as a NTM. This chapter gives a general idea of what should be understood as NTM and what are
the forms such measures take. It is divided in three parts: (i) it first addresses the concept of
NTM and briefly describes some of the definitions that have been adopted, (ii) then presents the
different classifications that have been proposed and, (iii) shows some of the most recent results
of the context of NTMs, obtained from studies based on the most recent collection of data.
1.1. Definition of NTMs
The literature has provided a wide range of definitions of NTMs. Two of the simplest definitions
are:
(i) “Any policy measures other than tariffs that can impact trade flows” (Staiger, 2012,
Pp. 2), and
(ii) “All policy-related costs incurred from production to the final consumer, with the
International organizations have provided more complex definitions. The Multi-Agency Support
Team1 (MAST) defines NTMs 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” (MAST, 2009, Pp. 30); UNCTAD describes them 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” (UNCTAD, 2010, Pp. 16)2. These
definitions present some common characteristics: First, NTMs are policy measures issued by
state agencies that can adopt various forms, contrary to tariffs that are merely numbers3; second,
NTMs generate distortion on trade, reflected in a change of quantities traded or in the prices of
the products.
Although all definitions are similar, in the present case the definition provided by UNCTAD is
the more suitable because it determines that NTMs have effect on international trade via prices
or quantities; therefore, it implies that NTMs are tools that have “the potential to substantially
distort international trade, whether their trade effects are protectionist or not” (Nicita, 2013,
Pp.8).
1
Members of the following organizations comprise MAST: FAO, IMF, ITC, OECD, UNCTAD, UNIDO, World Bank and WTO.
2
There are other more academic definitions as the one provided by Baldwin, who referred to NTMs as “any measure (private or public) that causes internationally traded goods and services to be allocated in such a way as to reduce potential real income”. However this definition has been criticized because it relies on normative aspects which are nowadays considered as one of the various forms NTMs can adopt.
3
Criteria in Cadot, Olivier, Maryla Maliszewska, and Sebastián Sáez. (2011). “Non-Tariff Measures: Impact, Regulation, and Trade Faciliation”, Pp.2.
1.2. Classification
Having defined NTMs as those measures applied by policy-makers that create a distortion on
trade, a detailed classification of the forms they can adopt is necessary to understand how they
are identified and distinguished from other type of measures.
Different efforts to establish an adequate classification have been endured, each of them
determining the criteria to differentiate them one from another. Economist as Baldwin and Laird
and Vossenaar used intent and impact as the differentiating criteria. The WTO developed an
NTM nomenclature for its negotiation purposes and has recently presented a new one in its
report Non-Tariff Measures and the WTO: “A first category of NTMs are those imposed on
imports. This category includes import quotas, import prohibitions, import licensing, and
customs procedures and administration fees. A second category of NTMs are those imposed on
exports. These include export taxes, export subsidies, export quotas, export prohibitions, and
voluntary export restraints. These first two categories encompass NTMs that are applied at the
border, either to imports or to exports. A third and final category of NTMs are those imposed
internally in the domestic economy. Such behind-the-border measures include domestic
legislation covering health/technical/product/labor/environmental standards, internal taxes or
charges, and domestic subsidies” (Staiger, 2012, Pp. 2).
The UNCTAD has presented its own classifications as well. The first was presented in 1994
which later became obsolete since it focused on measures that were no longer applied. Then in
2006 a new effort was initiated by UNCTAD’s Group of Eminent Persons on Non-Tariff
Barriers (GNTB) that took into account the new forms of NTMs; the results were published in
2009: “the new nomenclature provides disaggregation of NTMs, at one letter and one digit (64
cases). It covers a wide range of measures, some of which are clearly behind the border (like
anti-competitive measures) (…)” (Cadot, 2011, Pp. 4). The OECD has its own classification too,
that does not vary much from the one provided by UNCTAD; the main difference is that
OECD’s classification includes investment measures and puts together import surcharges.
Afterwards, in 2010 MAST presented the last system of classification after leading an effort in
data collection and revision of NTM’s classification. Basically this new classification has a
hierarchical structure by dividing NTMs on 16 groups (or chapters) denoted alphabetically,
which are subdivided into three subgroups designated by one, two and three-digit codes; it
includes new forms of SPS and TBT measures along with the inclusion of newly NTMs applied
throughout countries (i.e. restrictions on post-sales services, rules of origin). This classification is
going to be the guide for this paper because is the most updated and all recent analysis on NTMs
have used it as their guide.
Table 1.1 – 2010-MAST Classification
IMPO
RT ME
AS
URES
Technical Me
asures
A Sanitary And Phytosanitary Measures
Measures affecting areas such as restriction of substance, preventing dissemination of disease, conformity assessment measures related to food safety.
B Technical Barriers To Trade
Measures involving labelling, protection of the environment, standards on technical specifications and quality requirements.
C Pre-Shipment Inspection And
Other Formalities
Measures related to pre-shipment inspections and other customs facilities.
Non-Technical Measures
D Price Control Measures
Measures related to change the prices of imports (i.e. minimum prices, reference prices, anti-dumping, countervailing duties).
E
Licenses, Quotas, Prohibitions And Other Quantity Control
Measures
Measures intended to limit the quantity traded.
F Charges, Taxes And Other
Para-Tariff Measures
Measures involving taxes different from customs tariffs, including stamp taxes, license fees, statistical taxes and decreed customs valuations.
G Finance Measures
Measures destined to restrict the payment of imports (i.e. regulation on access and cost of foreign exchange), or impose restrictions on the terms of payment.
insurance or transport).
I Trade-Related Investment
Measures
Measures intended to restrict investment by means of requiring local content or that investment should be related to exports.
J Distribution Restrictions Measures referring to internal distribution of imported products.
K Restriction on Post-Sales
Services
Measures destined to difficult the entrance of technical staff to the importing country (i.e. staff responsible for the repair or maintenance of imported technological goods).
L Subsides (excluding export
subsidies under P700) Measures related to subsidies affecting trade.
M Government Procurement
Restrictions Measures that impose restrictions to bidders.
N Intellectual Property Measures related to intellectual properties rights.
O Rules Of Origin Measures intended to restrict the origins of products or their inputs.
EXPORT
MEAS
U
R
ES
P Export Related Measures Measures including export taxes, quotas or prohibitions.
Source: Compiled by the author, on the basis of information of “Non-Tariff Measures: Impact, Regulation, and Trade Facilitation” (Olivier Cadot, Maryla Maliszewska, and Sebastián Sáez) and “A Preliminary Analysis on Newly Collected Data on Non-Tariff Measures” (Alessandro Nicita and Julien Gourdon).
1.3. Data analysis
Several papers of economic journals and publications of International Organizations have given a
special attention to the analysis of NTMs’ effects on international trade. A study conducted by
the UNCTAD concluded that the reasons why this subject has become popular are:
(i) The effect of NTMs on trade is still not completely understood and has not been
adequately measured.
(ii) The proliferation of NTMs is evident and they have become the preferred trade policy
of governments.
(iii) NTMs may discriminate among trading partners; it is possible that a NTM that was
difference in compliance costs, which can vary from one trading partner to the other
usually being higher for low-income countries.
(iv) NTMs have been used for protectionist purposes by governments trying to benefit
and protect their domestic industries (Nicita, 2013, Pp. 1).
Due to the aforementioned reasons MAST promoted a major effort on data collection on NTMs
across countries which started in 2008 with seven pilot countries. Such effort was continued by
the World Bank by funding a data collection among 24 developing countries (5 in Africa, 5 in
the Middle East and North Africa, 3 in East and South Asia)4. The results of these operations
were “a major improvement over the data available through the WTO notification system for
SPS and TBT regulations, which has been unsatisfactory as a repository of information on all
NTMs (…) the information collected through the WTO notification system provides only partial
coverage, which may be insufficient from a transparency perspective” (Cadot, 2012, Pp. 11)5.
Colombia is among the group of 26 countries in which data was collected. For that reason, the
next analysis includes the situation of the country in relation with the other countries of the
group.
1.3.1. Frequency index and coverage ratios
Based on the data collection just mentioned, the UNCTAD conducted an initial study that shows
the actual status of the countries in relation with NTMs. The responsible of the study used two
methods to obtain descriptive information about the data: (i) frequency index that shows the
percentage of products subject to one or more NTMs and (ii) coverage ratios which measure the
4
Even though this has been a satisfactory effort, it’s not the end of it. The World Bank, through the ITC, is going to lead a long-standing effort together with the UNCTAD with the purpose of ensuring sustainable funding resources to continue the collection of data in other countries, aiming to cover most economies (Cadot, 2012, pp.10).
5
percentag
conclusio
(iii) quan
(Figure 1
in the reg
Figure 1 Source: Ta and Julien Figure Source: Ta and Julien
ge of trade
on is that N
ntity control
1.1). Results
gion.
.1 - Frequen
aken from “A P Gourdon), Pp.
1.2 - Fr
aken from “A P Gourdon), Pp.
subject to
NTMs are dis
l measures,
s showed tha
ncy index a
Preliminary An 7 requency Preliminary An 8. NTMs for stributed am (iv) pre-ship at Colombia nd covergae
nalysis on New
index and
nalysis on New
the importi
mong 5 main
pment requir
has the hig
e ratios by c
wly Collected D
d covergae
wly Collected D
ing country
n chapters: (
rements, and
ghest frequen
chapter in a
Data on Non-Ta
e ratios
Data on Non-Ta
(Nicita, 20
(i) TBTs, (ii
d (v) price
ncy index an
all 26 counti
ariff Measures
by chapte
ariff Measures
013, Pp. 6).
i) SPS meas
control mea
nd coverage
ies
s” (Alessandro
er, by re
Figure 1
Source: Ta and Julien
The stud
30% of th
control m
that quan
measures
.3 - Frequen
aken from “A P Gourdon), Pp.
dy showed th
he products
measures cov
ntity contro
s are no long
ncy indices
Preliminary An 9.
hat TBTs ar
and trade va
ver about 16
ol measures
ger applied d
and covera
nalysis on New
e the princip
alues, SPS m
6% of produ
cover almo
due to WTO
ge ratios, by
wly Collected D
pal NTM ad
measures cov
ucts and 20%
ost 20% of
O restrictions
y country
Data on Non-Ta
dopted by go
ver almost 1
% of trade va
f the produ
s; an explana
ariff Measures
overnments,
5% of produ
alues. A rem
ucts although
ation for thi
s” (Alessandro
, covering al
ucts, and qua
markably fac
h most of
s situation i
these measures have “transformed” to non-automatic licensing and pre-shipment inspections,
which cover almost 11% of products and trade; finally price control measures are rarely
implemented, covering only 2% of the products and 5% of trade (Nicita, 2013, Pp. 7). Another
reason is that the use of quantity control measures has diminished in general terms but Latin
American countries are still recurring to them.
What is remarkable of these results is the evident preference for TBTs and SPS measures. This
situation is disturbing to low-income countries to whom the costs of compliance are higher than
for developed economies, and possibly causing an annulment of the competitive advantages they
have on the labor market and certain trade preferences granted by FTAs (Nicita, 2013, Pp. 7).
Since Colombia is a developing country it deals with the negative consequences of the
imposition of TBT and SPS measures that includes, among others, the following: (i) high
infrastructure costs, (ii) export services and (iii) abroad outsourcing6. 1.3.2. Degree of regulation
The study also addressed the issue of the “degree” of regulation of commerce. To determine if
the commerce of a specific products is weakly or heavily regulated the simplest method is to
count the number of NTMs it is subject to7. Policy makers usually impose more than one NTM
on the same product, irrespective if such NTMs belong to the same chapter (according to the
2010-MAST classification) or not. One explanation of this practice is that measures are applied
6
One example of the lack of infrastructure in Colombia is evidenced by the Consumer Product Safety Improvement Act (CPSCIA), adopted by the Consumer Safety Product Commission (CPSC) of the United States. The CPSCIA requires certain certifications of the level of lead in specific products; such certification can only be issued by determined laboratories. Colombia does not count with a laboratory authorized for these procedures forcing exporters to recur to Peru’s laboratories in order to obtain the required certification.
7
in parallel (i.e. when they regulate different phases of the chain of production and the product
trade); or it can be a consequence of the efforts endured by governments in order to shield their
domestic industries from foreign competition (Nicita, 2013, Pp. 13). In Colombia this situation
could be a consequence of the dispersion of the regulation function among different agencies,
showing no harmonization or collaboration between them at the moment of establishing NTMs.
As Figure 1.5 shows, Colombia exhibits an apparently equilibrated tendency on the imposition of
one or more NTMs (belonging to the same chapter of the 2010-MAST classification)8 on the
same product, contrary to the results exhibited by other Latin American countries, except for
Argentina9.
8
The analysis done over this matter was on a chapter basis of the 2010-MAST classification and not on specific NTMs basis.
9
Figure
Source: Ta and Julien
1.3.3. N
The stud hypothes showed t NTMs, u result fro the inten foreign c
1.4 - Nu
aken from “A P Gourdon), Pp.
NTMs and T
dy tried to de
sis proposed
that countrie
using both po
om the nature
nt to use NT
competition” umber of Preliminary An 11. Tariffs etermine the
d the existe
es establishin
olicies for p
e of the prod
TMs as a com
” (Nicita, 20
products
nalysis on New
e relationship
ence of a p
ng higher tar
protectionist
duct, when th
mplement to
13, Pp. 17).
affected
wly Collected D
p between N
positive rela
riffs were th
objectives, “
hese are acc
o tariffs to f
The evidenc
by numb
Data on Non-Ta
NTMs and tr
ationship be
he same that
“although a
ompanied by
further insul
ce obtained f
ber of N
ariff Measures
raditional ta
etween them
imposed a h
large numb
y a high tari
ate domestic
from the dat
NTMs chap
s” (Alessandro
ariffs. A com
m since evid
higher numb
ber of NTMs
iff it may ind
hypothes
that, at th
Figure 1 Source: Ta and Julien After con such an analysis methodo
a data c
importan classifica The resul trade issu their pro measures
sis by indicat
he same time
.5 – Freque
aken from “A P Gourdon), Pp.
nducting a p
effort woul
it was nece
logies to rea
ollection ef
nce of the de
ation helped
lts of the stu
ues and eve
oliferation c
s, while the l
ting that cou
e, apply a lar
ency index a
Preliminary An 18.
preliminary
d not have
essary to hav
ach its conclu
ffort would
efinition is t
to better cat
udy show tha
n though th
cannot be d
least used ar
untries that a
rger number
and coverag
nalysis on New
approach of
been possib
ve a data c
usions. With
have been
that it allow
tegorize the
at governme
he use of NT
denied. Amo
re quantities
adopt restrict
of NTMs (F
ge ratios ver
wly Collected D
f the results
ble without
ollection tha
hout a defini
a complex
wed to delim
information
nts are recur
TMs varies b
ong NTMs
restrictions
tive tradition
Figure 1.6).
rsus tariffs
Data on Non-Ta
s of UNCTA
a delimited
at allowed t
ition of NTM
duty almos
mit the scope
collected by
rring to the u
between cou
the most p
. As for Col
nal trade pol
ariff Measures
AD’s study
scope. To
to apply the
M and a prop
st impossibl
e of the coll
y the researc
use of NTM
untries and
popular are
lombia, when
licies are the
s” (Alessandro
it is evident
develop suc
e aforementi
per classifica
le to fulfill.
lection, whil
chers.
Ms to address
between reg TBTs and n comparing e ones Nicita t that ch an ioned ation, . The le the s their gions, SPS
other Latin American countries included in the study, the conclusion is that it is the country with
the higher use of NTMs and with the higher number of products subjected to more than one
NTM. In words of the WTO “Colombia’s trade regime is now basically open and its average
tariff rate has been falling. Nonetheless, a number of non-tariff barriers persist, mainly involving
import registration and licensing requirements; and the large number of regulations also makes
the regime somewhat complex” (WTO, 2012, Pp. 38). The previous statement is analyzed in the
following chapter which presents the agencies in charge of issuing trade policies, the different
CHAPTER 2 – COLOMBIA’S CONTEXT REGARDING NTMs
NTMs have become the most popular trade policy tool among countries and Colombia is no
exception. As concluded in the previous chapter, Colombia has the highest indices of NTMs
among most of Latin American countries, situation that demands a more exhaustive analysis of
the national context when referring to NTMs which will allow to study if such a proliferation
could be reduced by the implementation of an impact analysis of the measures before they are
issued, which is the purpose of this paper.
This Chapter establishes the general NTMs framework by determining (i) which are the agencies
in charge of issuing NTMs, (ii) which NTMs have the highest level of application, and (iii) how
many disputes have been raised against Colombia due to its NTMs.
2.1. Colombia’s regulatory system on trade policies
Colombia has a national authority in charge of defining and tracing trade objectives that must
guide all the trade-related measures. That function is developed by the Ministry of Commerce,
Industry and Tourism (MCIT)10, “The MCIT is still the institution mainly responsible for
formulating and applying trade policy in Colombia. To formulate foreign trade policy, the MCIT
consults with various public sector entities involved with trade, as well as with private sector and
civil society representatives (…)” (WTO, 2012, Pp. 25).
MCIT works hand in hand with the Higher Council for Foreign Trade11, the advisory organism to
the government in matters related to foreign trade and firms’ competitiveness. Its functions are
defined in Decree 2553 of 1999 including the following: (i) advice on the guidelines of trade,
10
“Ministerio de Comercio, Industria y Turismo”. 11
customs, imports and exports policies, (ii) examine and advice on the adoption of trade
restrictive policies, and (iv) suggest the applicable guidelines to exports’ promotion mechanisms.
Other agency involved in the trade policy system is the Committee on Customs, Tariffs and
Foreign Trade12 which, according to Decree 3303 of 2006, analyzes and advises the government
and the Higher Council for Foreign Trade in tariffs-related policy, such as the modification of
tariffs and the control and evaluation of the tariff-related measures.
Some other agencies with whom MCIT consults trade-related topics are the Ministry of Finance
and Public Credit13, the Ministry of Agriculture and Rural Development14, and the Joint
Committee on Foreign Trade15. In accordance with this information, in the next section the
dispersion in Colombia’s regulatory entities is going to become evident, since there are many
agencies issuing regulations although the main one in charge of trade matters is the MCIT.
2.1 Issuing agencies and main NTMs
After examining who is in charge of defining the trade policy in Colombia, it is necessary to
identify which are the agencies that issue NTMs. To obtain such information, it is helpful to
recur to databases containing information about Colombia’s NTMs situation (i.e. I-TIP and
TRAINS)16.
2.1.1 I-TIP database
The WTO has established a set of databases with the purpose of providing comprehensive
information of NTMs as applied by its members, including members’ notifications in compliance
12
“Comité de Asuntos Aduaneros, Arancelarios y de Comercio Exterior” also known as “Comité Triple A”. 13
“Ministerio de Hacienda y Crédito Público”. 14
“Ministerio de Agricultura y Desarrollo Rural”.
15
“Consejo Superior de Comercio”. 16
with their WTO commitments and specific trade concerns raised by members on trade policy
measures adopted by some other member. This database is known as I-TIP in goods17 and offers
an integrated analysis and retrieval of notifications made on NTMs.
I-TIP in goods provides four different tools for information collection: (i) graphs over time, (ii)
tables by product, (iii) tables by members, and (iv) detailed query; by using any of them
researchers obtain a summary information of measures applied by a specific country and their
classification under 2010-MAST classification system.
2.1.2. WITS
The World Integrated Trade Solution (WITS) is a software developed by the joint work of the
World Bank and the UNCTAD18, and it offers access to the major compilations of data regarding
merchandise trade, tariffs and NTMs. WITS contains TRAINS database, which is maintained by
the UNCTAD, and includes all information in relation with imports, tariffs, para-tariffs and
NTMs, “The most comprehensive collection of publicly available information on NTB is the
database contained in the UNCTAD Trade Analysis and Information System (TRAINS), which
is accessible through the World Integrated Trade Solution (WITS) software. The NTB data
incorporated in TRAINS indicate the existence of categories of NTBs classified according to the
UNCTAD Coding System of Trade Control Measures (TCMCS) for particular products of
groups of products. Additional information such as a brief description of each NTB, an
indication of affected or excluded countries, and footnotes on exact product coverage are also
provided, where available. There is not, however, any measurement of the restrictiveness of the
measure” (UNCTAD, 2005, Pp. 714). This affirmation, besides describing the importance of
TRAINS database, confirms the need of establishing an evaluation impact system for NTMs
17
I-TIP Services database exclusive for the trade in services. 18
since their restrictive effects are not describe in any of the databases available; therefore, it must
be a task for governments to assume.
Although the data offered by WITS-TRAINS is of great value, for the purpose of this paper such
data is quite specific since it grants information not only at a chapter level19 but at different
subheadings from 6 to 8 digit classification. Hence a study based on such information could
become tedious and needs some economics and statistical knowledge and development, aspects
that fall out of this paper’s scope.
2.1.3. Data analysis
2.1.3.1. Technical measures: TBT and SPS measures
The information used in the analysis of this paper includes the notifications made by Colombia
to the SPS and TBT’s WTO Committees, in compliance with its international obligations since
2009 (Annex). Although it may seem as a reduced period of time, it comprehends an important
number of notifications taking into account that in the period 2006-2011 Colombia made 207
notifications to the WTO.
Concerning technical NTMs, the responsibility for formulating policy on SPS measures is shared
by various ministries, “the SPS system operates on the principle of the harmonization of policy
in the different sectors. SPS measures are adopted by the body responsible for risk assessment,
where appropriate” (WTO, 2012, Pp. xi). Since SPS measures are directed to ensure that
products are safe for consumers, they focus on food safety and animal and plant health standards
by means of imposing strict health and safety regulations; that is why Colombian agencies
adopting SPS measures ought to have qualified knowledge over such matters.
19
The sam regulator Welfare2 Commer Housing Developm Agricultu Figure 2 Source: Co 20 Law 14 ministries: 21 Law 144 and reorga 22 This ana Colombia me situation ry agencies 0
, (iii) Min
ce, Industry
and Territo
ment21, (ix) ural Institute
2.1 – Colomb
ompiled by the
444 of 2011 o Ministry of H 44 of 2011 orde anized it as the
alysis is based during that per
of dispersio
are: (i) Mi
nistry of M
and Tourism
orial Develo
) General S
e (Figure 2.1
bian Agenci
author, on the
ordered the sci ealth and Socia ered the scissio Ministry of the on the inform riod were inclu
on among ag
inistry of S
Mines and E
m, (vi) Mini
opment, (vi
Secretariat
).
ies issuing N
e basis of inform
ission of the M al Welfare and on of the Minis e Environment mation containe
uded.
gencies is e
ocial Welfa
Energy, (iv)
stry of Tran
iii) Ministry
of the And
NTMs in the
mation collecte
Ministry of So d Ministry of L
stry of the Env t and Sustainab d in the tables
evident for T
are, (ii) Min
Ministry o
nsport, (vii) M
y of the En
dean Comm
e period 200
ed from I-TIP
ocial Welfare Labour (Arts. 7
vironment, Hou ble Developme s of the Annex
TBTs. For b
nistry of H
of Labour,
Ministry of t
nvironment
munity, and
09-201322
and divided i – 9).
using and Terr ent (Arts. 11 – . Not all the n
both of them
ealth and S
(v) Ministr
the Environm
and Sustain
(x) Colom
it into two dif
The dispersion of functions among national agencies is evidenced and at first sight it would seem
there is no co-ordination among them when issuing the NTMs, each of them acting on an
individual and isolated basis. Additionally, due to the close relationship between TBT and SPS
measures23, it is not uncommon to see that they share the same issuing agencies such as the
Ministry of Social Welfare, ICA, and the General Secretariat of the Andean Community. Despite
this, it does not reflect in a lower number of NTMs adopted but instead, shows on contrary that
probably each agency focuses exclusively in its functions and does not internalize other
authorities’ needs or objectives that could lead to a joint performance with better results. This
situation is explained by the fact that “The task of preparing technical regulations is not
centralized in a specific body; such regulations may emanate from the standardization institute
ICONTEC24, or from ministries, regulatory commissions and decentralized bodies. Although
each entity has its own internal procedure for the establishment of technical regulations, since
2009 a procedure for elaborating and issuing them has been agreed, on the basis of good practice
recommendations. Most technical regulations reflect or are based on international standards”
(WTO, 2012, Pp. xi).
Now, since TBT measures are the way used by countries to establish the characteristics a product
must comply with, such as design, performance, labelling or packaging25, it is just obvious to
23
Article 20 of GATT gives the possibility for governments to adopt policies directed to protect human, animal or plant life and health, with the obligation of applying them as long as those policies do not discriminate among trading partners or serve as a means for disguising protectionist measures. In order to regulate the application of such measures, two agreements were established among WTO-members through which countries can find the criteria to harmonize the need to apply those standards with the prohibition of implementing protectionist policies. 24
“Instituto Colombiano de Normas Técnicas y Certificación”. 25
“Technical regulation: document which lays down characteristics or their related processes and production methods including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, making or labelling requirements as they apply to a product, process or production method.
find that the main agencies regulating such matters have a knowledge of technical aspects. Every
TBT measure has a specific objective which justifies its application; in accordance with the
reports made by Colombia to the TBT Committee, the main objectives adduced by the
authorities are: (i) protect human health and safety and prevent practices likely to mislead
consumers, (ii) protection of human, animal and plant life, health and safety, and (iii) protect
human life and health and prevent risks to consumers (Figure 2.2).
For SPS measures, their extension is delimited by the necessity to protect human, animal and
plant health, with the obligation for the issuing country to apply them in a non-discriminatory
basis. To comply with such requirement when notifying the adoption of a SPS measure,
Colombia justifies their application meanly by advocating to the following purposes: (i) food
safety, (ii) protection of humans from animal or plant pests or diseases, and (iii) animal health
(Figure 2.3).
Figure 2.2 – Objectives of TBT measures
Source: Compiled by the author, on the basis of information collected from I-TIP
requirements as they apply to a product, process or production method.” (TBT Agreement, Annex 1: Terms and their Definitions for the Purpose of this Agreement).
44%
37% 10%
9%
TBT
MEASURES
JUSTIFICATION
Protection of Human Health and
Safety / Prevent Practices Likely
to Mislead Consumers
Protection of Human, Animal and
Plant Life, Health and Safety
Protect Human Life and Health
and Prevent Risks to Consumers
Figure 2.3 – Objectives of SPS measures
Source: Compiled by the author, on the basis of information collected from I-TIP
Now, recalling that Colombia is the Latin American country with the highest degree of
regulation of commerce26, except for Argentina, when reviewing the context of TBT and SPS
measures it becomes clear that certain products are subjected to both (Table 2.1).
Table 2.1 – Measures subject both to TBT and SPS measures
AGENCY PRODUCT WTO DOCUMENT
Ministry of Social Welfare
Honey G/SPS/N/COL/171;
G/TBT/N/COL/133.
Poultry G/SPS/N/COL/184;
G/TBT/N/COL/139.
Capybara meat G/SPS/N/COL/186;
G/TBT/N/COL/141.
Cellyulosic materials, objects, packaging and equipment
G/SPS/N/COL/193; G/TBT/N/COL/149.
Vegetable and animal oils and fats G/SPS/N/COL/202;
G/TBT/N/COL/154.
Food for human consumption and raw material used in the production for human consumption which contain GMO
G/SPS/N/COL/205; G/TBT/N/COL/155.
26
From the countries included in the data collection effort developed by UNCTAD.
31%
30% 30%
9%
SPS
MEASURES
JUSTIFICATION
Food Safety
Protection of Humans / Territory from Animal or Plant Pest or Disease
Animal Health
Fruit G/SPS/N/COL/122;
G/TBT/N/COL/160.
ICA
Animal feed G/SPS/N/COL/179;
G/TBT/N/COL/136.
Seeds G/SPS/N/COL/181;
G/TBT/N/COL/137.
Land snails G/SPS/N/COL/183;
G/TBT/N/COL/138.
Olaquindox gorwth promoter G/SPS/N/COL/185;
G/TBT/N/COL/140.
Bio-inputs G/SPS/N/COL/188;
G/TBT/N/COL/144. Medicines, biologic, bases for magistral
preparations, cosmetics, pesticides, miscellaneous veterinary products and diagnostic kits and reagents
G/SPS/N/COL/200; G/TBT/N/COL/153.
Source: Compiled by the author, on the basis of information collected from I-TIP
This is a consequence of SPS and TBT measures belonging to the same group, “Technical
Measures”, of NTMs in the 2010-MAST classification. Therefore, agencies in charge of issuing
such policies have a determined level of knowledge and expertise to guarantee that such
measures fulfill the requirements of legitimacy and comply or adjust to Colombia’s international
obligations.
Finally, even though data shows that in Colombia the main agencies in charge of issuing TBT
and SPS measures are the Ministry of Social Welfare and the ICA, the WTO has defined the
institutional framework of standards and regulations in Colombia as follows: “MCIT through it
Regulation Directorate, is the body that defines standardization, quality, certification and
accreditation and metrological policies and practices. The MCIT coordinates the National
Quality System (SNC)27, whose basic objectives are to promote in the markets the safety, quality
and competitiveness of the sector producing or importing of good and services and to protect the
27
interest of consumers. This work is carried out mainly through the Supervisory Authority for
Industry and Trade (SIC)28 and the National Institute of Metrology (INM)29, which establish,
coordinate, direct and oversee the national industrial quality control, weights, measures and
metrology programs and organize the quality control and metrological laboratories considered
indispensable for the proper performance of their functions. Decree No. 4175 of 2011 split off
the SIC’s scientific and industrial metrology functions and transferred them to the INM. The SIC
continues to perform its legal metrology functions, while the INM’s objectives are to coordinate
scientific and industrial metrology and to carry out activities that make possible innovations and
support economic, scientific and technological development, through research, the provision of
metrological services, support for metrological control activities and the dissemination of
measurements traceable to the International System of Units” (WTO, 2012, Pp. 38).
2.1.3.2. State Trading - Monopoly on alcoholic beverages
Colombia maintains a monopolistic situation on alcoholic beverages and spirits industries. Such
situation is justified in terms of tax income for the territorial authorities, who have independence
in the charge and collection of taxes on those products whose destination is the Health System.
These measures assuring the State’s monopoly over alcoholic beverages and spirits falls within
the scope of Chapter H – Anticompetitive Measures Recalling the 2010-MAST classification.
The monopolistic regulation has a different structure from TBT and SPS policies, which explains
why the relevant agencies in charge of these matters are not the same; in this case the Congress
28
“Superintendencia de Industria y Comercio”. 29
has the main function of determining the extension of such regulations, using laws as its
preferred mechanisms30.
2.1.3.3. Antidumping and countervailing measures and safeguards31
The Trade Practices Subdirectorate of the MCIT is the organism in charge of the management of
trade protection measures: (i) dumping32, (ii) subsidies33 and (iii) safeguards34. Regarding AD,
the MCIT can initiate an investigation motivated on a written complaint from the domestic
industry and the exporters or on an ex officio basis. The MCIT can impose provisional AD
measures while conducting the investigations, and at the end of the process decide to continue
with its application or terminate it. This procedure is regulated by Decree No. 2550 of 2010,
Decree No. 991 of 1998, Decision 283 of 1991, and Decision 456 of 1999.
Colombia has applied several antidumping (AD) measures throughout the years, especially to
China which is the most problematic trading partner on this matter, “Between 2006 and 2011,
Colombia initiated 25 anti-dumping (AD) investigations and applied ten new definite measures;
provisional measures were applied in 13 of the 25 investigations launched – most of them in
2007. As for 31 December 2011, Colombia had 12 AD measures still in force all of which were
applied to imports from China”. (WTO, 2012, Pp. 38). From the WTO notifications, up to 2013
30
A general perspective of the protection of competition is the following: In 2009 Colombia passed a new law to update regulations governing the protection of competition. It continues to use tax incentives to promote both domestic and foreign investment, along with other programmes to support the development of specific sectors and to improve social and regional equality. Colombia has observer status in the Plurilateral Agreement on Government Procurement. During the review period, it has strengthened its legal and institutional framework for government procurement, in particular by improving transparency, with legal amendments to the public procurement regime being introduced in 2007. Nonetheless, procurement is used as a means to promote domestic industry and employment, mainly through preferences.
31
This measures are applied on a discriminatory basis, that is, taking into account the country of origin of the imports, since their purpose is to protect the economy from unfair practices of trade (AD and countervailing measures) or from a threat or damage to the domestic industry (safeguards).
32
This matter is regulated by Decree No. 2550 of 2010. 33
This matter is regulated by Decree No. 299 of 1995. 34
the only countervailing measures in force are imposed to China; nonetheless the Ministry is
developing other investigations that include certain products coming from Mexico and Korea
(Figure 2.4).
Figure 2.4 – Number of AD measures applied by Colombia between Dec. 2004 – Jun. 2013
Source: Compiled by the author, on the basis of information collected from I-TIP
Colombia has not made notifications to the WTO in relation with investigations on safeguard and
countervailing measures since 2006.
2.1.3.4. Licenses and registration
Colombia has a license system that includes two variables: (i) automatic licensing and (ii)
non-automatic licensing. In both scenarios, the requirements are applied on a non-discriminatory
basis, that is, independently of the origin of the imports. The WTO in its report concluded that
“(…) in 2011 there were 2.939 tariff lines subject to automatic licensing, and 188 subject to
non-automatic licensing, compared to 2.844 and 185, respectively in 2006. These increases are
explained by the fact that a non-automatic license has been required since 2010 to import certain
0 2 4 6 8 10 12 14
Russia Ukraine China China China China China China China China China China
Dec. 2004 Dec. 2005 Dec. 2006 Dec. 2007 Dec. 2008 Dec. 2009 Dec. 2010 Dec. 2011 Dec. 2012 June 2013 NUMBER OF ANTIDUMPING MEASURES
precursors for narcotics production, while the number of tariff lines subject to automatic
licensing requirements has increased owing to a change in tariff classification” (WTO, 2012, Pp.
61). Based on the previous information, the change in the application of licenses has the
following trend (Figure 2.5):
Figure 2.5 – Application of licenses by Colombia (2006 to 2011)
Source: Compiled by the author, on the basis of information collected from WTO’S Trade Policy Report.
The difference between both types of licenses is illustrated in the following flow chart:
0 500 1000 1500 2000 2500 3000 3500
Automatic Non‐automatic
Automatic Non‐automatic
2006 2844 185
2011 2939 188
EVOLUTION ON LICENCES FROM 2006 TO 2011
Licences
Automatic (free importation)
Serves as a mechanism to implement regulations.
It requires a prior authorizaion by government authorities
The Foreign Trade Directorate of the MCIT is in charge of managing the import registration
which is done throug the VUCE
Non-automatic
(prior licensing)
Mechanism to control imports of a specific nature
The Higher Council for Foreign Trade is responsible of determining the list of products
