Market News

 October 10, 2007
Non-tariff barriers in the Environmental Sector

 Despite the importance of non-tariff barriers (NTBs) documented by business surveys and other sources for trade in non-agricultural products, there is very limited understanding of the incidence and impact of NTBs on trade in environmental goods and associated services.

This paper investigates the types of NTBs that exporters of certain environmental goods and associated services report having encountered in foreign markets. The overall project consists of 10 case studies covering both OECD and non-OECD countries (Austria, Brazil, Canada, Chile, France, Germany, India, Japan, Korea and the United States).

In each case study, data were collected through a survey followed by in-depth interviews of company officials. Following up the first instalment of the project reporting on NTBs identified by companies in five countries (Brazil, Canada, France, Japan and the United States), this paper presents and analyses survey findings on NTBs reported by a total of 136 firms operating in seven environmental sectors in all ten countries.

Accounts provided by exporting firms in the countries surveyed suggest that environmental goods and associated services face various non-tariff barriers in foreign markets which firms at times perceive to be very significant. Barriers relatively often mentioned relate to regulations on product testing and certification, customs procedures, regulations of payments, inadequate protection of intellectual property rights (IPR), government procurement procedures and product standards and technical specifications. Overall, the prominence of these six areas among the concerns that companies voiced holds across a broad range of both developed and developing exporting countries.

Even in the already highly integrated regional market such as the EU, responses of firms with strong commercial ties to EU member countries suggest that more can be done to facilitate intra-regional trade in such areas as technical barriers to trade and public procurement.

The analysis of leading NTBs identified by the business survey also reveals that particular types of NTBs were perceived as significant export barriers in certain export markets. For instance, customs procedures were mentioned predominantly in developing or transition economies. Moreover, the kinds of customs procedures problems tended to be different for developed and for developing-country export markets: strict and inflexible application of paperwork required for customs clearance appears to be a problem that firms are encountering in developed country export markets, whereas perceived arbitrary behaviour of customs officials appears to pose burdens for firms exporting to developing countries or economies in transition.

Negative experiences with government procurement procedures were reported notably for developing countries in Asia. The NTBs identified by this study appear to be generic and not specific to the environmental sector. Past studies reviewing business surveys undertaken in other economic sectors find a similar pattern where measures and practices relating to technical barriers to trade and customs procedures lead privatesector concerns about trade barriers.

Similarly, government procurement procedures and inadequate protection of IPR have also been pointed to by producers of other goods.

The study also provides data illustrating the additional costs and other effects of NTBs that companies in the environmental industry must reckon with. In their most extreme incarnations, respondents reported that NTBs make it prohibitively expensive or difficult for exporters to sell their goods into some foreign markets. NTBs also have forced some environmental goods exporters to abandon markets altogether or restrict the types of goods exported to such markets.

However, in dealing with the identified significant barriers it appears that in many cases exporters tend to devise ways of coping with them rather than resorting to interventions by their home governments. Interviews revealed that exporters at times hire local partners to handle complex problems or raise the issue with the relevant authorities in the export market.

Making requested or expected (informal) payments provides a way out for exporters to overcome obstacles to conducting business abroad; this option usually is more readily available to larger firms that do not face resource constraints. Another finding is that firms seek to cope with these barriers themselves, on an ac hoc basis. Because this is unlikely to solve the actual problem it is somewhat surprising that in only a few instances have firms interviewed indicated that they have approached governments for help.

The leading NTBs that firms identified in this study have broad implications in the context of the overall WTO negotiations. By shedding light on these barriers to exports of environmental goods and associated services, the study can contribute to on-going efforts to liberalise trade in this area.

Survey responses also indicate that greater benefits will accrue from a simultaneous liberalisation of trade in environmental goods and services because products, technology and services are often supplied on an integrated basis. The relatively frequently mentioned problems with customs procedures underline the timeliness of the negotiations on trade facilitation included on the agenda of the Doha Development Agenda (DDA).

The dissatisfaction expressed by respondents about government procurement practices draws attention to weaknesses, in terms of both the level of participation by countries and substantive issues, of the existing plurilateral disciplines in this area. Based on the findings of this survey, the concerns expressed by environmental technology firms go beyond the transparency issues under discussion under the Doha agenda mandate.

For example, to support effective participation of smaller firms in this market, the tender process may need to be simplified in major ways. The concerns so often voiced by participants in respect to product testing and certification suggests that this industry and trade in this sector would benefit greatly from initiatives which governments individually or jointly could take to eliminate redundancy of procedures and reduce the costs of conformity assessment.

Also, it would be for consideration whether issues of Technical Barriers to Trade (TBT) raised by the environmental industry might be taken up in the discussions of the WTO Committee on Technical Barriers to Trade. With regard to the protection of intellectual property, despite progress being made in this area, the experiences which firms describe indicate that there is still much room for seeking more effective implementation of international commitments and stronger enforcement mechanisms, at bilateral, regional and multilateral levels.

The strong regional export orientation of firms in several country studies points to the importance of regional markets for expanding trade in this sector and serving as a stepping stone for SME internationalisation. This reality could be more explicitly recognised if governments took advantage of the action agendas of existing or prospective regional or bilateral trade agreements to address the concerns highlighted by this study. Responses of firms from EU member states suggest that more can be done to facilitate cross-border business even in the already highly integrated EU market.

The survey helps to better understand the effects that NTBs have at the firm level, and what firms do when they encounter barriers of various types. It appears that the firms participating in this study mostly seek to devise ways of coping with the difficulties that they encounter, rather than seeking help from governments. Since these measures are ad hoc and do not address problems at their source, they cannot substitute for governments taking action.

The study points out that many of the concerns voiced by firms in the environment sector can be addressed at the WTO but that more can be done also at the bilateral and regional levels.

To download the entire report please Click Here.

Source: OECD