Developing countries need to focus urgently on the removal of non-tariff barriers if they are to promote trade and growth according to a new study.
Barriers to prosperity – developing countries and the need for trade liberalisation also argues that there is an urgent requirement for the EU to remove protectionist import barriers erected against poor countries.
The report finds that although tariff barriers are still a problem they are not as significant as non-tariff barriers in stopping developing countries from moving into the export of higher value added products such as processed foods.
Currently, developing countries often have a very low share of exports of final processed products. For example, developing countries account for 91 per cent of raw coffee exports but only 3 per cent of processed coffee exports. It is the export of these processed agricultural products that provides the best opportunities for growth and development in many of the world’s poorest countries.
Specific barriers identified in the research include:
- EU rules of origin and rules relating to traceability.
- The combination of such rules with preferential trade agreements which becomes more onerous as the degree of processing of agricultural products increases.
- Health and safety regulations.
- Labelling schemes such as fair trade and organic.
- Environmental standards, such as those relating to palm oil exports.
- Export and import procedures imposed by developing countries themselves.
It is also likely that the existence of these barriers is pushing up the price of food in developed countries.
- Non-tariff barriers need to be brought to the forefront of the global trade debate and made a priority by trade negotiators.
- Developing countries need to remove their hugely bureaucratic non-tariff barriers to trade. Currently, for example, exporters from India have to go through 12 separate bureaucratic processes involving 10 separate agencies.
- More reliable data on non-tariff barriers need to be collected in order to quantify their coverage and the problems caused by them.
- Developing countries also need to remove tariff barriers which are still prevalent in some industries. India, for example, has a tariff barrier of 99 per cent on roasted coffee and Mexico 71 per cent.
Commenting on the report, Prof. Philip Booth, Editorial Director at the Institute of Economic Affairs, said:
“If world economic growth is not going to stall, we need to step up the momentum to remove trade barriers. The bureaucratic obstacles to trade in developing countries serve no useful purpose and simply keep the poorest people in the world poor.
“In the West, we also need to do all we can to remove non-tariff barriers to trade. The EU needs to begin to think globally rather than focusing its efforts on complex rules designed to promote trade within EU countries themselves.”
Notes to editors
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Barriers to prosperity – developing countries and the need for trade liberalisationis authored by Sushil Mohan (School of Business, University of Dundee), Sangeeta Khorana (School of Management and Business, Aberystwyth University) and Homagni Choudhury (School of Management and Business, Aberystwyth University). The report can be downloaded from www.iea.org.uk.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.