{"id":1108,"date":"2021-01-06T05:50:07","date_gmt":"2021-01-06T00:50:07","guid":{"rendered":"https:\/\/pide.org.pk\/blog\/?p=1108"},"modified":"2021-01-06T05:50:10","modified_gmt":"2021-01-06T00:50:10","slug":"pakistans-ntms-challenges-at-the-border-for-importers","status":"publish","type":"post","link":"https:\/\/pide.org.pk\/blog\/pakistans-ntms-challenges-at-the-border-for-importers\/","title":{"rendered":"Pakistan\u2019s NTMs: Challenges At the Border for Importers"},"content":{"rendered":"\n<p>By Aadil Nakhoda*<\/p>\n\n\n\n<p>Pakistan Institute of Development Economics (PIDE) in collaboration with the World Bank hosted a webinar on <a rel=\"noreferrer noopener\" href=\"https:\/\/www.pide.org.pk\/index.php\/webinars?id=810\" target=\"_blank\">26th October 2020<\/a> to present and discuss the International Trade Center\u2019s \u201cInvisible Barriers to Trade &#8211; Pakistan: Business Perspectives\u201d. The report highlights several challenges faced by Pakistani businesses as they seek to expand their footprint in international markets. Pakistani exporters face significant challenges as compliance to non-tariff measures (NTMs) imposed by trading partners on their imports is overly complex or trade-restrictive as businesses may not only face prohibitions but report strict requirements on product quality in destination markets. Furthermore, businesses report procedural obstacles related to trade that can arise in Pakistan, during transit or in destination countries. Lack of appropriate information and difficulties in retrieving information made available to businesses impedes border facilitation.<\/p>\n\n\n\n<p>Although, the challenges faced by exporters are more extensively studied, the report highlights that importers too face significant challenges as they experience regulatory or procedural obstacles. The report identifies 46 percent of the importers surveyed facing difficulties with NTMs. The inspection process for the importers tends to be long as they tend to struggle with documentation. <\/p>\n\n\n\n<p>The purpose here is to analyze the extent of NTMs imposed by Pakistan on its imports by comparing its frequency and coverage ratio across different countries. The countries or regions included in the analysis are either major export destination markets for Pakistani exporters, such as the US, the EU and China (CHN) or important regional trade powerhouses such as India (IND) and Vietnam (VNM). NTMs are classified into different categories based on whether they impact importers either \u2018at the border\u2019 through various customs regulations or \u2018beyond the border\u2019 through product and process regulations. These classifications differ from the one provided by data collecting agencies and can have differing impact on the prices of goods available in the domestic market.<\/p>\n\n\n\n<p>Customs regulations include quantitative restrictions as\nwell as licensing, inspection and certification processes at the border. They\ndrive a wedge between the world price and the domestic price of a good that is\nimported. Product and process regulations increase the fixed cost of production\nas they may influence the characteristics of the products imported in the case\nof the former or regulate the methods used in producing the product imported in\nthe case of the latter. These measures increase the supply price of goods available\nin the market, likely inhibiting the supply of poor quality goods. On the other\nhand, such measures can help reduce market failures by addressing information\nasymmetries and negative externalities. Consumer regulations include price\ncontrol measures, creating a wedge between producer and consumer prices. It is\npertinent to mention that WTO bans the use of quantitative restrictions on\ntrade. Further, the national treatment principle of the WTO ensures that\nimported goods do not receive less favorable treatment than that provided to\nsimilar products of domestic origin. However, WTO does allow certain exceptions\nto both restrictions.<\/p>\n\n\n\n<p>The data on NTMs imposed by Pakistan is extracted from UNCTAD\u2019s NTM Hub. NTMs are classified for products at the HS six digit level. The data on imports at the HS six digit-level is extracted from ITC\u2019s Trademap.org. The frequency index is calculated as the proportion of products facing NTMs while the coverage ratio is calculated as the proportion of imports facing NTMs. The theory-based classification that divided NTMs into customs, product, process and consumer regulations is borrowed from Ederington and Ruta (2016). \u00a0<\/p>\n\n\n\n<p>Figure 1\nhighlights the frequency index and the coverage ratio of NTMs imposed by\nselected countries or regions. Pakistan has the lowest frequency index and\ncoverage ratio of NTMs compared to the other countries. Pakistan is less likely\nto adopt NTMs than tariffs as trade policy instruments. According to World\nBank\u2019s recent study titled \u201cModernizing Trade in Pakistan: A Policy Roadmap\u201d,\nPakistan is ranked as the world\u2019s seventh most protected economy with\nrelatively high tariff rates on imports. Although, Pakistan adopts the least\nnumber of NTMs across each of the four classifications as observed in Figure 2,\ncustoms regulations is likely to be the most prominent amongst the other\nclassifications<a href=\"#_ftn1\">[1]<\/a>. <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"675\" height=\"675\" src=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-01.png\" alt=\"\" class=\"wp-image-1110\" srcset=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-01.png 675w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-01-300x300.png 300w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-01-150x150.png 150w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-01-450x450.png 450w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-01-60x60.png 60w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-01-550x550.png 550w\" sizes=\"(max-width: 675px) 100vw, 675px\" \/><figcaption> Figure 1: The Frequency Index and the Coverage Ratio of NTMs Imposed by the Selected Countries or Regions <\/figcaption><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"551\" height=\"522\" src=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-02.png\" alt=\"\" class=\"wp-image-1111\" srcset=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-02.png 551w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-02-300x284.png 300w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-02-317x300.png 317w\" sizes=\"(max-width: 551px) 100vw, 551px\" \/><figcaption> Figure 2: The Number of Measures Adopted by NTM Classifications by the Selected Countries or Regions <\/figcaption><\/figure>\n\n\n\n<p>Customs regulations impact a significant share of imports\nreporting NTMs based on the four different classifications in Pakistan as well\nas in other countries as observed in Figure 3,\nproduct and process regulations have a limited role on imports into Pakistan<a href=\"#_ftn2\">[2]<\/a>.\nHowever, in countries where trade is well-facilitated at the border, a higher\nshare of imports covered by customs regulations does not necessarily mean that\nimporters face greater challenges. Considering the extent of customs\nregulations using different instruments including non-automatic licensing,\nsanitary and phytosanitary measures (SPS) and technical barriers to trade (TBT),\nthe most prominent form of NTM adopted by Pakistan in terms of the imports it\ncovers is non-automatic licensing such as quotas and conditional prohibition as\nobserved in Figure 4.\nThe relatively low levels of imports into Pakistan in products reporting other\nmeasures suggests that such NTMs are likely prohibitive. On the other hand, TBT\ncertifications impact a larger percentage of imports in all the other listed countries.\n<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"537\" height=\"527\" src=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-03.png\" alt=\"\" class=\"wp-image-1112\" srcset=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-03.png 537w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-03-300x294.png 300w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-03-60x60.png 60w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-03-306x300.png 306w\" sizes=\"(max-width: 537px) 100vw, 537px\" \/><figcaption> Figure 3: Prominence of Different NTM Classifications on the Imports into Selected Countries or Regions <\/figcaption><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"654\" height=\"583\" src=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-04.png\" alt=\"\" class=\"wp-image-1113\" srcset=\"https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-04.png 654w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-04-300x267.png 300w, https:\/\/pide.org.pk\/blog\/wp-content\/uploads\/2021\/01\/150-ANakhoda-Fig-04-337x300.png 337w\" sizes=\"(max-width: 654px) 100vw, 654px\" \/><figcaption> <a>Figure <\/a>4: Prominence of Different NTM Types Involving Customs Regulations <\/figcaption><\/figure>\n\n\n\n<p>In essence, importers are not only burdened by NTMs at the\nborder as reported by ITC but face a range of NTMs that are different than those\nadopted by important trading counterparts and other regional countries. With a stronger\nfocus on \u2018at-the-border\u2019 measures compared to other measures, the limited\nnature of \u2018beyond-the-border\u2019 measures adopted by Pakistani policymakers may\nfail to tackle market imperfections. This likely has an adverse impact on the\nparticipation in global and regional value chains as well, particularly if such\nregulations limit trade instead of reducing market imperfections. Therefore,\nthe composition of the NTMs adopted by Pakistan and its divergence from other\ncountries is an important topic for researchers interested in trade related\nissues in Pakistan. <\/p>\n\n\n\n<p><strong>References:<\/strong><\/p>\n\n\n\n<p>Ederington, J., &amp; Ruta, M. (2016). Non-tariff measures\nand the world trading system. Washington (DC): World Bank Group. Policy\nResearch Working Paper No. WPS, 7661.<\/p>\n\n\n\n<p>International Trade Centre. (2020). Pakistan: Invisible\nbarriers to trade. Business perspectives. ITC, Geneva.<\/p>\n\n\n\n<p>Rocha Gaffurri, N. P., Laakso, A., Mckenna, J. M., &amp;\nVarela, G. J. (2019). Modernizing Trade in Pakistan: A Policy Roadmap (No.\nAUS0001114, pp. 1-164). The World Bank.<br><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p><a href=\"#_ftnref1\">[1]<\/a>\nThe theory-based classifications do not necessarily cover all the different\ntypes of NTMs imposed by the importing country.<\/p>\n\n\n\n<p><a href=\"#_ftnref2\">[2]<\/a> As one product may report multiple NTMs across different classifications, the total percentage of imports covered by the theory-based classifications can exceed 100.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p>* The writer is a faculty member in the Economics Department, Institute of Business Administration, Karachi<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Aadil Nakhoda believes importers are not only burdened by NTMs at the border as reported by ITC but face a range of NTMs that are different than those adopted by important trading counterparts and other regional countries. With a stronger focus on \u2018at-the-border\u2019 measures compared to other measures, the limited nature of \u2018beyond-the-border\u2019 measures adopted by Pakistani policymakers may fail to tackle market imperfections. <\/p>\n","protected":false},"author":2,"featured_media":1116,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1,7,30],"tags":[351,350,265,349,76],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Pakistan\u2019s NTMs: Challenges At the Border for Importers - PIDE Blog<\/title>\n<meta name=\"description\" content=\"Aadil Nakhoda believes importers are not only burdened by NTMs at the border as reported by ITC but face a range of NTMs that are different than those adopted by important trading counterparts and other regional countries. 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