Sponsored by the Hewlett/IATRC Program – Capacity Building Washington – DC Jan 9, 2008

1. A Review of theoretical approaches and mathematical models for non-tariff barriers to trade: Sanitary and Technical Barriers for agricultural products Sponsored by the Hewlett/IATRC Program – Capacity Building Washington – DC Jan 9, 2008 Sílvia Helena G. de Miranda – University of São Paulo Prof. G. Edward Schuh – University of Minesotta

2. Outline 1- Introduction 2 – Objectives 3 - Identifying Sanitary and Technical Barriers to Trade 4 - Mathematical Approaches to Measure Effects of Sanitary and Technical Barriers to Trade 5 - Public Policy Choices – Models to Support Government Decisions on Sanitary and Technical Issues 6 - Final Comments: Challenges for the Developing Countries

3. 1 - Introduction- Sanitary (SPS) and technical barriers: most of problems are related to voluntary standards- Cause losses in competitiveness, raise costs, can exclude suppliers from the markets- Concerns with food safety, territory and environmental protection, consumer security are spreading all around the world:- consequently stricter regulation will prevail - consumers will benefit - difficulties for developing countries - lags between richer and poorer increase- What technical or sanitary measure consists on a barrier?- How to disentangle legitimate from illegitimate requirements?

4. 2 – ObjectivesTo present an updated review of literature on:*- the conceptual background for sanitary and technical barriers to trade; - the methodologies available to quantify the effects of such barriers: advantages and limitations*Highlighting: - the new features of this subject - the developing countries challenges; - the support to public policy

5. 3. Identifying Sanitary and Technical Barriers to Trade: Divergences and Convergences of Concepts and Definitions • Regulation x Standard • What are the motivations to raise regulation/standards? • Trade effects and welfare effects • Even if voluntary (private) standards are affecting trade flows, for the governments they are not considered barriers, in the sense of being subjected to public policy intervention; • Nor are they for the international organizations; • Measures that restrict trade by chance while correcting market inefficiencies and addressing legitimate concerns should not be qualified as an NTB (Beghin and Bureau, 2001) • However, the government is expected to provide infrastructure to support the compliance of countries to standards.

6. 3. Identifying Sanitary and TechnicalBarriers to Trade: The Classification of NTB and the Legitimacy Issue • Checklist: • TPSC (1998) – for SPS • Popper et al. (2004)/NIST – for TBT • Classification 1) For Technical barriers • Roberts et al. (1999): by police and by scope; by regulatory goal – verify if it is welfare-reducing or welfare-enhancing • Josling et al. (2004): identify the regulatory agents; dimensions of the measure; the tools employed by regulatory measures 2) For SPS and TBT measures - Miranda and Barros (2005): trade and welfare effects; legallity; scientific consistency – in order to evaluate and rank the measures by their legitimacy and relevance

7. 3. Identifying Sanitary and TechnicalBarriers to Trade: Collecting Data for Sanitary and Technical Barriers to Trade • Inventory approach and surveys 1 - Inventory Approach: Notifications, Specific Trade Concerns • Difficult to have a proper database for sanitary and technical barriers to trade • SPS and TBT’s notifications: may highlight trends in terms of sanitary and technical regulation • Closer to identifying barriers • STC and • data on refusals in commerce: only the US has the registers • Source of data for modelling – but with limitations

8. Table 1 – Data used forinventory approaches regarding SPS and TBT issues Source: elaborated by the authors. * Apud Beghin and Bureau (2001)

9. 3. Identifying Sanitary and TechnicalBarriers to Trade: Collecting Data for Sanitary and Technical Barriers to Trade 2 – Surveys • Also a method for collecting data, quantitative or qualitative information; • There are restrictions on using this approach for quantitative studies: quantification approach is appropriate, otherwise if it deals with measuring the compliance costs faced by firms and industries; • Literature: OECD (1999), USDA (1996), Roberts and De Remer, 1997; Thornsbury et al., 1999; Henson et al. (2000) Wilson and Otsuki (2004),Burnquist et al. (2006), Faria and Burnquist (2006), Baller (2007)

10. 4 - Mathematical Approaches to Measure Effects of Sanitary and Technical Barriers to Trade Previous works on this topic: • Deardorff and Stern (1998) • Laird (1996) • Maskus and Wilson (2001) and • Beghin and Bureau (2001)

11. List of commonly used methods applied to san/tech barriers quantification • The Price Wedge Method: trade-effects • Gravity models: trade-effects • Stylized microeconomic approaches: what is the effect of standards on the structure of competition among firms? • Multi-market models and sectoral approaches: partial equilibrium models – trade effects and also welfare-effects

12. Public Policy Choices – Models to Support Government Decisions on Sanitary and Technical Issues • For Public policy: it is important to work with an ex-ante approach • Cost-Benefit Analysis- Risk assessment • CGE • Relevance Index • For developing countries: concerns on providing tools to have a better resource allocation

13. Final comments • Sanitary and technical requirements imposed by governments and companies are increasing and becoming more restrictive • Challenge for developing countries: higher production and marketing costs to comply with the requirements and tecnological lags • Enlarge the conceptual framework for analyzing non-tariff barriers to account for voluntary standards and other trends being faced by companies in the day-to-day experience of international trade! • The developing countries will probably increase their demand on public agents to provide conditions to help achieve those requirements • It is important to evaluate how to deal with voluntary standards in the international organizations involved with trade issues

14. Final comments • It is important to have tools to help in the cases in which the protectionist component is unclear but where the regulations have a genuine concern about consumer protection: the legitimacy issue • A more active participation of developing countries in international fora to discuss sanitary and technical regulation and normalization • For dealing with impacts of sanitary and technical barriers – it is still better to use a case-by-case approach • Improve ex-ante analytical tools – public policy • A technical barrier to trade that may become increasingly important in the future involves measures that may be out in play to attenuate global warming – new trends for technical barriers • Next steps: a graphic analysis, further developments in CGE models