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Presented by:
The Pacific Basin Economic Council (PBEC)
Endorsed by:
PBEC’s Steering Committee and adopted by
its Board of Directors
PBEC - A Dynamic Force
The Pacific Basin Economic Council (PBEC) is an association of senior business leaders from throughout the Pacific Basin region dedicated to expanding trade and investment through fostering open markets. Founded in 1967, PBEC serves as the key organization through which regional executives create business relationships, encourage increased trade and investment, support open markets to lower trade barriers, and address emerging issues likely to shape the Pacific and global economies.
PBEC’s most distinguishing feature is its multinational membership, which includes more than 1,200 of the region’s most dynamic and important companies. The representatives of these firms are business leaders in their respective communities. PBEC currently has Member Committees in Australia, Canada, Chile, China, Colombia, Ecuador, Fiji, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Peru, the Philippines, Russia, Chinese Taipei, Thailand, and the United States.
REPORT ON
ADMINISTRATIVE BARRIERS TO TRADE
Department of Economics and Finance
Faculty of Business
City University of Hong Kong
| EXECUTIVE SUMMARY |
INTRODUCTION |
| Background |
Purpose of the
Report |
| Methodology |
Outline of the
Report |
| 1. PROGRESS IN REDUCING ABT |
Meaning of ABT |
Progress in the World Trade
Organization (WTO) |
| Unilateral Initial Actions |
Osaka Action Agenda |
Manila Action Plan for APEC (MAPA) |
| 3. PROBLEMS IN THE APPLICATION
OF TRADE REGULATIONS |
Implementation of Trade Regulations |
| Degree of Unclarity and Inadequacy of Coverage |
Accessibility of Trade Regulations |
BACKGROUND AND PURPOSE OF THE STUDY
Pacific Basin economies have enjoyed some of the highest growth rates in the world in the recent past. This success is closely related to the dramatic, and continuing, expansion of international trade and investment in the region. The Asia Pacific Economic Co-operation forum (APEC) has decreed that there will be free trade in the region by 2010 for developed economies and no later than 2020 for all economies. Now, however, business people are encountering a number of serious obstacles that hinder open trade and investment and that make it difficult for regional companies to boost their competitiveness by capitalising on local efficiencies.
The Pacific Basin Economic Council (PBEC) is an association of business leaders from 20 economies throughout the Pacific. For the last 30 years, PBEC has encouraged open trade and investment in the Asia Pacific region and believes that both PBEC and APEC share a similar vision for continued development into a free trade area in the 21st century. At its Steering Committee Meeting in Osaka in November 1995, PBEC identified the reduction of administrative barriers to trade in the region as one of the key business issues to be put forward to APEC leaders. With the successful reduction of typical trade barriers such as tariffs and quotas, countries are now in a position to turn to administrative barriers. The problem seems particularly prominent for the Pacific region, given the diverse character of APEC and the different levels of development in legal, regulative and administrative systems in APEC member economies. In order for business to effectively expand trade in the region, APEC economies must make all related regulations and guidelines uniformly clear and accessible to business.
A Working Committee on Administrative Barriers to Trade has been established by PBEC to identify and propose solutions to reduce administrative barriers to trade. This report was prepared to help the Working Committee in its study of major administrative trade barriers in the Asia-Pacific region. The purpose of the report is to:
assess the business impacts of these barriers on international trade in the region;
identify the administrative barriers to trade in goods and services in the region; and
review the current initiatives, particularly in the context of a view toward proposing further policy measures to address and reduce major outstanding administrative barriers.
Administrative barriers to trade (ABT) are a form of non-tariff barrier. Our definition of ABT is as follows: ABT are the direct restrictions on or problems arising from interpreting or applying trade regulations. ABT can be categorized into restrictions on market access, restrictions on personnel, and transparency of regulatory information which all indirectly prohibit or restrict trade and foreign investment.
A SURVEY OF ADMINISTRATIVE BARRIERS TO TRADE
Besides studying trade regulations and other published information on administrative barriers to trade, we sent questionnaires to individual PBEC member companies to obtain first hand information about the ABT faced by the business community in the PBEC economies. The results of this survey form a major component of the report.
Business Impact
Our survey study shows that administrative barriers to trade have a significant impact on companies doing business in the Pacific-Basin region. About one-quarter of the respondents indicated that they spent more than 5% of their operating cost in dealing with ABT in 1996. Around one-half of the respondents estimated that their profit would be increased by more than 5%. These cost and profit figures may be downward biased, however, because firms tend to choose to operate in markets with less ABT.
In the survey, firms were further asked whether they have ever deferred or abandoned plans for expansion because of the awareness of ABT in some PBEC economies. More than a quarter of the firms indicated that they had made such a decision. Moreover, 11.4% reported that they had withdrawn from a particular market because they found that ABT in this PBEC economy were too excessive. Thus, these results provide clear evidence that the presence of ABT has made a significant number of firms in the Pacific-Basin region defer/abandon their expansion plan and even withdraw totally from a market. The negative impact of ABT makes the need to remove excessive ABT an urgent one if PBEC economies are to continue to enjoy high growth rates.
Top-Ten Barriers
The ten most often reported ABT are (in descending order):
restrictions on foreign ownership;
inconsistency/confusion in regulations;
difficulties in obtaining visas;
inconsistency/confusion in implementation of regulations;
officially sanctioned monopolies/cartels;
excessive documentation requirements;
lack of publicity of regulations;
restrictive property rights and commercial presence;
unfair tax treatment; and
quota on number of foreign/local workers.
POLICY RECOMMENDATIONS
Based on the survey results and our research on various policy initiatives at APEC and WTO, we recommend that the governments of the PBEC economies adopt the following initiatives to reduce administrative barriers to trade.
If recommended implementation time limits exceed WTO time limits, WTO standards govern.
L
Policy Recommendations for Enhancing Market Access| Measures to Enhance Market Access | Short
Term Plan (implement within 5 years) |
Medium
Term Plan (implement within 10 years) |
| Increase foreign firms’ participation in the following sectors: telecommunications, insurance, tourism, retail trade, business/professional services, freight and passenger transport |
|
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| Improve the competitive
environment in the APEC region (Officially sanctioned monopoly/cartel) |
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| Provide an open investment regime (Restrictions on foreign ownership) | identify priority sectors for
each economy and open all other sectors to foreign investments with specified timetables treat international investors impartially, in accordance with national and international law (national treatment) ensure the transparency and accessibility of investment policies by publicising the Guide to APEC Investment Regimes through the Internet |
maintain opened sectors as they
are substantially ease restrictions on foreign investments in priority sectors adopt policies which permit international investors to own and manage their enterprises to the extent necessary to maximize their ability to obtain an adequate return |
| Reduce documentation requirement (Excessive documentation requirement) |
computerise customs procedures
according to the WTO Agreement on Customs Valuation Principles mutually recognise international standards on electrical and electronic appliances, food labelling and machinery accelerate the work on Mutual Recognition Arrangement on Conformity Assessment standardise customs procedures among APEC economies |
achieve common standards of quality and performance for building materials, electrical and electronic equipment and appliances, safety, heating and cooling equipment, and medical devices |
| Fair tax treatment (Unfair tax treatment) | eliminate discriminatory taxation
of income or production except in sensitive sectors. All value-added taxes should be
included in the total tax treatment keep floating taxes in reasonable range if they are adopted |
achieve the goal of no less
favourable taxation for foreign enterprises avoid double taxation |
L
Policy Recommendations for Promoting Mobility of Business PersonnelMeasures to Promote Mobility of Business Personnel |
Short
Term Plan |
Medium
Term Plan |
| Promote business travel (Difficulty in obtaining visa) |
|
|
| Loosen quota on foreign personnel
(Quota on number of foreign/local workers) |
|
L
Policy Recommendations for Improving Transparency of Trade Regulations| Measures to Improve Transparency of Trade Regulations | Short
Term Plan (implement within 5 years) |
| Publicise regulations (Lack of publicity of regulations) |
|
| Enhance transparency of customs
rules and procedures (Inconsistency/confusion in regulations) |
|
| Mutually recognise standards and conformance (Inconsistency/confusing implementation) |
|
L
Policy Recommendations for Enhancing Good Trade Policies and Practices| Measures to Enhance Good Trade Policies and Practices | Short
Term Plan (implement within 5 years) |
| Promote domestic education and dissemination of information related to administrative barriers to trade |
|
| Ensure participation of business in trade policy and trade policy making |
|
* The items should be in effect immediately.
Pacific Basin economies have enjoyed some of the highest growth rates in the world in the recent past. This success is closely related to the dramatic, and continuing, expansion of international trade and investment in the region. For example, the growth of world trade between 1991 and 1995 was 9 percent a year, whereas the average rate of trade growth of the APEC economies was over 12 percent during that period. Intra-APEC exports and imports increased from 67 percent to 75 and 74 percent, respectively, over the 1985-94 period. The Asia Pacific Economic Co-operation forum (APEC) has decreed that there will be free trade in the region by 2010 for developed economies and no later than 2020 for all economies. Nonetheless, business people still encounter obstacles that hinder open trade and investment and that make it difficult for regional companies to boost their competitiveness by capitalising on local efficiencies.
The Pacific Basin Economic Council (PBEC) is an association of business leaders from 20 economies throughout the Pacific. For the last 30 years, PBEC has encouraged open trade and investment in the Asia Pacific region and believes that both PBEC and APEC share a similar vision for continued development into a free trade area in the 21st century. At its Steering Committee Meeting in Osaka in November 1995, PBEC adopted an important statement of its strategies that support APEC objectives. This statement was part of the implementation agenda of "PBEC 2000: A Five Year Development Plan" which had been adopted at the Auckland International General Meeting held earlier in May 1995.
In the statement, PBEC identified five key business issues and put forward its recommendations as to how APEC leaders could tackle these issues. These recommendations are based upon the considerable knowledge and experience which PBEC business leaders have accumulated during their many years of conducting business in the Asia Pacific region. One of the five issues is to reduce administrative barriers to international trade in the region. With the successful reduction of typical trade barriers such as tariffs and quotas, countries are now in a position to turn to administrative barriers to trade. Among the remaining trade barriers after the Uruguay Round, administrative barriers to trade are likely to draw keen attention of trade negotiators in various parts of the world. The problem seems particularly prominent for the Asia Pacific region, given the diverse character of APEC and the different levels of development in legal, regulative and administrative systems in APEC member economies. In order for business to effectively expand trade in the region, APEC economies must make all related regulations and guidelines uniformly clear and accessible to business.
PBEC further recommended measures to reduce administrative barriers to trade as noted in a policy paper adopted in May 1996: Implementing Free Trade and Investment in the Pacific Region. The policy paper includes 10 areas, in which
"Investment", "Government Procurement", "Market Access for Goods and Services", "Domestic Regulation and Taxation", "Transparency" and "Business Facilitation" are particularly related to administrative barriers to trade. As stated in the policy paper, PBEC supported the efforts of APEC and the WTO in promoting trade and investment liberalization, and encouraged all the PBEC economies to join and to enforce multinational agreements. In May 1997, PBEC adopted the resolution APEC: Sharpening the Focus, Sustaining the Momentum. One main message from the resolution was that PBEC fully supported APEC’s commitment to liberalize trade and investment in the Asia-Pacific region, and urged APEC to become an implementation body. PBEC suggested that APEC should give priority to administrative barriers to trade and that PBEC was ready to work with APEC and any other bodies to promote trade and investment in the Pacific region.
A Working Committee on Administrative Barriers to Trade (ABT) has been established by PBEC to identify and propose solutions to reduce administrative barriers to trade. PBEC Hong Kong was asked to chair the Working Committee.
This report was prepared to help the PBEC Working Committee in its study of major administrative barriers to trade in the Asia-Pacific region. The purpose of the report is to:
assess the business impacts of these barriers on international trade in the region;
identify the administrative barriers to trade in goods and services in the region; and
review the current initiatives, particularly in the context of a view toward proposing further policy measures to address and reduce important outstanding administrative barriers.
Issues which are related to this study, namely, foreign direct investment, environmental protection, technology transfer and intellectual property rights, will however, not explicitly be covered in this report due to time constraints. It is hoped that the report will be useful in contributing to the multilateral efforts to improve the business climate in the region with respect to administrative barriers and regional bureaucracy.
Besides studying trade regulations and other published information on administrative barriers to trade (ABT), we have circulated a questionnaire to obtain first hand information about the ABT faced by the business community in the PBEC economies. Results of this survey form a major component of our report.
The questionnaire, which is written in both English and Chinese (Appendix A), consists of five sections:
Section I - Background Information
Section II - Identifying Administrative Barriers to Trade
Section III - Problems in Applications of Trade Regulations
Section IV- Business Impacts of the Overall Amount of Administrative Barriers
Section V Policy Measures to Reduce Administrative Barriers to Trade
To seek advice on the questionnaire and sharpen our focus on the examination of administrative barriers, we also contacted PBEC member economies' trade commissioners and chambers of commerce located in Hong Kong for a 30-minute (or more) interview/discussion. Our team members have conducted 15 such interviews.
Some 1,000 questionnaires were sent out to the 20 PBEC economies. 145 were received. This report is based on an analysis of the survey, the interviews with trade commissioners and chambers of commerce, and our own research on the topic.
The first chapter summarizes the progress made with respect to the commitment of removal of administrative barriers to trade under GATT/WTO. In addition, it discusses what has been achieved with regard to the liberalization of administrative barriers in APEC and in the recent Manila Action Plan for APEC (MAPA). A list of ABT is included to define the scope of the subject. Chapter 2 describes the background information of the survey and identifies the ABT encountered by companies in their foreign trade operations. Chapter 3 reports the findings on the degrees of clarity, coverage, consistency, and accessibility of trade-related regulations and procedures. The business impacts of administrative barriers are discussed in Chapter 4. Finally, Chapter 5 discusses some of the underlying economic and political factors that lead to ABT and proposes policy measures to reduce such barriers.
| 1. PROGRESS IN REDUCING ABT | |
In November 1994, APEC leaders declared their intention to achieve free trade in the Asia-Pacific region no later than 2020, with an earlier date of 2010 for the developed economies of APEC. Since then, much progress has been made in reducing conventional trade barriers to goods and services in APEC economies. However, traditional impediments to imports, such as tariffs or quotas, are no longer the only strategic barriers to international transactions. Impediments to trade and investment can arise from divergence in domestic economic or commercial policies as well as from differences in, or lack of transparency of, domestic regulatory and administrative systems or in product standards, with which administrative barriers to trade (ABT) have been clearly concerned in this region. The advisory group, the Pacific Business Forum (PBF) (a set of firms trading and investing in the Asia Pacific), has already urged APEC leaders:
to acknowledge that in the post Uruguay Round era, policy-based practices, such as diverging standard, administrative procedures, and arbitrary application of policies loom as impediments to the flow of trade and investment equal to traditional barriers... to incorporate the principle... including transparency, non-discrimination national treatment, right of establishment, reporting requirements, investment incentives and dispute settlement. |
Before looking into the progress on reducing ABT, we define what is ABT and provide a list of trade control measures that are related to ABT. We then summarize the measures under WTO concerning ABT. We then list the actions taken by the individual economies in APEC in reducing ABT so far, and their joint action plan as agreed after the APEC Economic Leaders Meeting in Osaka (1995) and Manila (1996).
ABT are a form of non-tariff barriers. ABT are basically practical problems arising from interpreting or applying the rules on trade or investments which indirectly prohibit trade. The main reasons leading to the appearance of administrative barriers to trade include the inconsistency of regulations, ambiguity of rules, lack of communication, and excess flexibility in standards requirements. According to the above definition, we select a subset of trade barriers that can be related to ABT from the list of impediments developed by institutions such as the United Nations Conference for Trade and Development (UNCTAD) and the World Trade Organisation (WTO). Those trade control measures are listed in Table 1.1.
Table 1.1: List of Trade Control Measures Related to ABT
UNCTAD CODE AND DESCRIPTION |
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4000 FINANCE MEASURES |
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5000 AUTOMATIC LICENSING MEASURES |
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6000 QUANTITY CONTROL MEASURES |
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7100 SINGLE CHANNEL FOR IMPORTS |
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8000 TECHNICAL MEASURES |
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ABT are more prominent in the services market than in the goods market. Since services are not transportable, a physical presence is necessary. This means that the government must allow foreign suppliers to open a commercial outlet to provide the service. It also means that provisions for international transactions in services cannot be separated from foreign direct investment (FDI). As a result, any regulatory control, competitive policies, administrative procedures, uncertainty caused by arbitrary application of rules and/or inadequacies of the definition and transparency of policies on FDI will automatically become ABT on services. Besides, because of the relatively high degree of regulation in the services sector, this means that the type of administrative impediments could be considered as trade barriers, if they are applied in a discriminatory fashion to foreign service providers.
Within GATT, we find that there are several agreements related to ABT. Following is a list of those agreements:
Agreement on Sanitary and Phytosanitary Measures
Agreement on Technical Barriers to Trade
Agreement on Trade Related Aspects of Investment Measures
Agreement on Implementation of Article VI (Anti-Dumping)
Agreement on Preshipment Inspection
Agreement on Rules of Origin
Agreement on Import Licensing Procedures
Agreement on Safeguards
General Agreement on Trade in Services (GATS)
Based on these agreements, the WTO and UNCTAD are working on several programs under the International Trade Centre which aim at helping members of the WTO to implement the GATT in reducing ABT. We summarize these programs as follows:
TRADE POINT TECHNICAL COOPERATION PROGRAMME
As of March 1, 1995, 89 Trade Points had been or were being established in 52 countries, while another 27 official requests had been submitted to UNCTAD. Trade Point is:
A trade facilitation centre, where participants in foreign trade transactions are grouped together under a single roof to provide all required services for trade transactions.
A source of trade-related information that provides actual and potential traders with data about business and market opportunities, potential clients and suppliers, trade regulations and requirements, etc.
A gateway to global networking. All Trade Points are being or will be interconnected in a world-wide electronic network and equipped with efficient telecommunications tools to link up with other global networks.
THE PROGRAMME FOR CUSTOMS REFORM AND COMPUTERISATION (ASYCUDA)
The program has been or is being installed in over 60 countries in all regions of the world. It is expected that the number of user countries will grow beyond 100, making ASYCUDA the de facto world standard for customs. The system uses state of the art information technology. There are modules for import and export licenses; manifest control; processing and validation of customs declarations; examination; warehousing and suspense regimes; customs accounting and open facilities for the integration of user defined modules.
TRADE ANALYSIS AND INFORMATION SYSTEM (TRAINS)
UNCTAD has developed a comprehensive computerised information system at the Harmonised Commodity Description and Coding System (HS) based tariff line level covering all these measures for more than 50 countries, known as the Database on Trade Control Measures (tariff, para-tariff and non-tariff measures). Member states are supplied with the TRAINS CD-ROM. TRAINS contains information from the Database, combined in an integrated manner with, inter alia, national trade laws, regulations and administrative procedures.
COMPETITION POLICY AND CONTROL OF RESTRICTIVE BUSINESS PRACTICES
The United Nations General Assembly adopted in 1980 the set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, often referred to as UNCTAD Intergovernmental Group of Experts (IGE) on restrictive business practices (RBPs) to monitor the application and implementation of the set by member states. Features of the set include:
Assistance in formulating competition policy and adopting or improving legislation and procedures for the control of RBPs.
Workshops and seminars for the training of officials in the control of RBPs.
Dissemination of information on RBPs, including a regularly updated handbook on RBP legislation
Facilitate cooperation between national competition authorities.
Besides these new programs in the WTO/UNCTAD, there are also some regional arrangements in NAFTA, ASEAN and the EU that have made some positive steps in reducing ABT. All these recent developments at the multilateral level have triggered some progress in APEC economies.
| 1.3. UNILATERAL INITIAL ACTIONS | |
In spite of some complaints on ABT, considerable efforts have been made by individual APEC economies to liberalize their goods markets by reducing tariffs and some NTBs over the last 20 years. This can be shown by a significant reduction in the average level of applied tariff, and the frequency ratio of non-tariff barriers (NTBs). However, there is little concrete evidence that individual economies have reduced ABT, except for some progress in harmonization of product standards and testing procedures, and customs procedures.
There is no study to quantify the progress in the reduction of ABT. Recently, however, Low (1995) summarized (Table 1.2) the various steps of deregulating and/or liberalizing service sectors in different APEC economies, and this roughly charts the progress to date.
Table 1.2: Actions Notification of GATS Commitment Submitted to
APEC Secretariat before Osaka Meeting
| Service Sectors | Market Opening Access | Foreign Ownership | Deregulation in Regulatory Barriers |
| Architecture | SI | ||
| Banking | AU, NZ | ||
| Broadcasting | NZ | ||
| Distribution | JA | ||
| Financial Services | CH, KO, NZ, CT | CA | KO, JA, NZ, SI, CT |
| Legal Services | CH | ||
| Postal Services | AU | ||
| Telecommunications | ME, US, NZ | KO, ME, US | AU, CA, CL, HK, JA, SI, CT, US |
| Transport | CA, CT, NZ | AU, HK, JP, CT |
Note: AU: Australia; CA: Canada; CH: China; CL: Chile; CT: Chinese Taipei; HK: Hong Kong; JA: Japan; KO: Korea; ME: Mexico; NZ: New Zealand; SI: Singapore; US: United States
Although APEC members have been continuously deregulating their services sectors unilaterally, not all of these deregulatory measures can translate into trade liberalization. One must bear in mind that deregulation and liberalization are not equivalent in meaning for the services sector as they tend to be for the goods sector.
| 1.4. OSAKA ACTION AGENDA | |
Given the proposed actions, APEC has drawn up an action plan to target their goal of free trade in 2020. APEC economies plan to take actions in several specific areas including tariffs and non-tariff measures, services, investment, customs procedures, standards and conformance, competition policy, government procurement, mobility of business people, and deregulation. Of these, the following concrete action plans are especially related to administrative barriers to trade.
REDUCING ABT IN SERVICE SECTORS
Telecommunication Sector: Conform to the Guidelines for Trade in International Value-Added Network Services (IVANS) by 1998; conform to the Guidelines for the Harmonisation of Equipment Certification in the immediate term; harmonise administrative procedures governing certification of customer telecommunication equipment; begin to develop and implement a model Mutual Recognition Arrangement on conformity assessment by the end of 1997.
Energy Sector: Identify by the end of 1996, institutional, regulatory, and procedural impediments that affect investment in electricity, and develop a guidance framework to facilitate investment; facilitate transborder infrastructure investment and financing; harmonise energy standards by establishing accreditation of laboratories and the acceptance of test results arising from them by 1999; standardise energy standards to domestic appliances.
Transportation: Promote the implementation of International Civil Aviation Organisation and International Maritime Organisation standards, regulations, and safety measures; complete the Transpiration Road Transport Harmonisation Project; develop mutual recognition for road vehicles; facilitate the privatisation of transportation infrastructure projects; eliminate the requirements for paper documents for key messages relevant to international transport and trade within 10 years.
COMPETITION POLICY
Each economy will:
review its respective competition policies, their enforcement, and transparency, and will strengthen the process of drafting such policies, such as policy development, legislative drafting, and the constitution, powers, and functions of appropriate enforcement agencies;
study competition policy issues that impact on trade and investment flows in the Asian-Pacific region, and the inter-relationship between competition policy and trade/investment policies;
establish a database on competition policy;
encourage information exchange, notification, and consultation among competition authorities of the APEC economies; and
develop non-binding principles with regard to competition policy.
GOVERNMENT PROCUREMENT
APEC economies will:
develop a common understanding on government procurement policies and systems, and government procurement practices within each economy;
enhance the transparency of its government procurement regimes and establish an information database;
conduct surveys to exchange information on existing government procurement regimes and on publication of such information in APEC economies;
encourage establishment of an APEC government procurement database, including the provision of a common entry point (such as the internet) for voluntary participation; and
develop a set of non-binding principles on government procurement.
INFORMATION GATHERING AND ANALYSIS
APEC economies will:
conduct surveys of trade and investment impediments;
review and analyse the impact of trade liberalisation; and
adopt international standards for trade in services and international investment data such as those developed by the IMF.
STANDARD AND CONFORMANCE
APEC economies will conform to:
the Declaration on APEC Standards and Conformance Framework
Agreement on Technical Barriers to Trade (TBT Agreement)
application of Sanitary and Phytosanitary Measures (SPS Agreement)
develop, by the end of 1997, alignment with international standards in four priority areas: electrical and electronic appliances, food labelling, plastic, and rubber products.
participate in the activities of international standardisation bodies such as the International Organisation for Standardisation (ISO), the International Electrotechnical Commission (IEC), and the Codex Alimentarius Commission.
| 1.5. MANILA ACTION PLAN FOR APEC (MAPA) | |
Compared with the previous APEC meetings, the Manila meeting in 1996 covered more areas, especially publicity and transparency of trade regulations. Some of the action agenda related to ABT are briefly listed as follows.
Investment: The APEC members agreed to negotiate the liberalization process in a cooperative, consultative, and non-confrontational way.
Customs Procedures: The APEC members agreed on specific procedures to simplify, harmonize, and computerize customs procedures by 2000. Moreover, the transparency of customs laws and procedures is ensured by introducing clear appeal systems, providing advanced rulings on tariff classifications, publishing information on administrative guidelines, procedures, and rulings, in addition to customs laws and regulations.
Standards and Conformance: The APEC members agreed to exchange information on toy safety and mutual recognition arrangements on conformity assessment on food and food products. The members also agreed to align by 2005, standards with international standards on electrical and electronic appliances, food labelling, rubber gloves and condoms, and machinery. Transparency of standards are ensured.
Mobility of Business People: The APEC members are considering to issue an APEC-wide business travel card. The APEC Business Travel Handbook is published in order to enhance transparency.
Government Procurement: The APEC members agreed to provide access to data bases, contact points, and transparency on procurement opportunity. The access of information is widened through the Internet.
Rules of Origin: The APEC members agreed to discuss the harmonisation of rules of origin in international forums. The transparency of rules of origin is enhanced through a publication of the relevant rules within APEC.
Dispute Mediation: The APEC members agreed to publish by 1997 a list of dispute settlement mechanisms. The existing effective dispute resolutions by the business sector is promoted.
Deregulation and Competition Policy: The APEC members will take collective actions to identify and establish appropriate cooperation arrangements on competition policy. An annual report on deregulation of individual APEC members is published starting in 1996.
In order to have a quick review of actions on ABT taken in MAPA, the relevant actions related to the ABT in the PBEC survey is summarized in Table 1.3.
Table 1.3: MAPA Progress on the ABT
| Administrative Barriers to Trade | MAPA Agreements | |
| Restrictions on Market Access | ||
| Officially sanctioned monopoly/cartel |
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| Quotas |
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| Government procurement |
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| Restrictions on foreign ownership |
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| Excessive documentation regulations |
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| Other restrictions on foreign purchases (imports) of goods/services across borders |
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| Restrictive property rights & commercial presence |
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| Restrictions on Personnel | ||
| Difficulty in obtaining a visa |
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| Irrelevant professional certification |
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| Transparency of Regulatory Information | ||
| Lack of publicity of regulations |
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| Inconsistency/confusion in regulations |
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| Inconsistent/confusing implementation |
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2. IDENTIFYING ADMINISTRATIVE BARRIERS TO TRADE |
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In this chapter we will report the results of our survey on the identification of administrative barriers to trade. We sent out survey questionnaires to all PBEC members around the Pacific Basin region. We defined the ABT in the questionnaire and asked the subject companies to identify the ABT they have encountered, and to indicate the degree of difficulty to overcome them.
Some 1,000 questionnaires were sent out to the 20 PBEC economies. 145 were received. The geographical distribution of the respondents is illustrated in Table 2.1. There are 50 responses from the Asian NIEs (Hong Kong 29, Chinese Taipei 14, Korea 7), 19 from the ASEAN (Thailand 7, Malaysia 6 and Philippines 6), 21 from Japan, and 7 from China. North America (U.S. and Canada) and Australasia (Australia and New Zealand) account for 12 each. Finally, 12 questionnaires are from Latin America (Chile, Mexico, Columbia). There was no reply, however, from Peru and Russia.
Table 2.1: Geography Distribution of the Respondents
PBEC Economy |
Frequency |
Hong Kong |
29 |
Japan |
21 |
Chinese Taipei |
14 |
Australia |
11 |
China |
7 |
Korea |
7 |
Thailand |
7 |
Canada |
6 |
Chile |
6 |
Malaysia |
6 |
Philippines |
6 |
U.S. |
6 |
New Zealand |
5 |
Fiji |
4 |
Mexico |
4 |
Columbia |
2 |
Indonesia |
1 |
Peru |
0 |
Russia |
0 |
Others |
2 |
Total |
145 |
Table 2.2 presents the distribution of the manufacturing or services sectors that respondents identified as most affected by administrative barriers to trade. Of the 30 sectors mentioned, roughly half belong to the services sector (72) and the other (52) are from the manufacturing sector.
Table 2.2: Distribution of Sectors Most Affected by ABT
| PBEC Economy | Number of Services Sector | Number of Manufacturing Sector |
| Australia | 6 |
3 |
| Canada | 4 |
2 |
| Chile | 2 |
4 |
| China | 4 |
2 |
| Chinese Taipei | 7 |
6 |
| Columbia | 0 |
1 |
| Fiji | 2 |
1 |
| Hong Kong | 16 |
8 |
| Indonesia | 1 |
0 |
| Japan | 8 |
9 |
| Korea | 3 |
2 |
| Malaysia | 2 |
4 |
| Mexico | 2 |
2 |
| New Zealand | 3 |
2 |
| Peru | 0 |
0 |
| Philippines | 5 |
1 |
| Russia | 0 |
0 |
| Thailand | 4 |
3 |
| U.S. | 2 |
2 |
| Others | 2 |
0 |
| Total | 72 |
52 |
Our definition of ABT is as follows: ABT are the direct restrictions or problems arising from interpreting or applying trade regulations. ABT can be categorized into three categories: restrictions on market access, restrictions on personnel, and transparency of regulatory information. Under these three categories, there are 24 ABT:
Restrictions on Market Access: officially sanctioned monopoly/cartel, unfair tax treatment, quotas, export licensing systems, government procurement, price controls, anti-dumping policy, restrictions on foreign ownership, use of environmental regulations, excessive documentation requirement, other restrictions on foreign sales (exports) of good/services across borders, other restrictions on foreign purchases (imports) of goods/services across borders, restrictive property rights & commercial presence, antitrust policy that discriminates against foreign firms, restrictions on establishment of ancillary services (e.g. trucking, terminal operations, warehousing);
Restrictions on Personnel: difficulty in obtaining visa, discriminatory licensing practices for foreign workers, quota on number of foreign/local workers, higher income tax on foreign workers, irrelevant professional certification, excessive use of local labour regulations;
Transparency of Regulatory Information: lack of publicity of regulations, inconsistency/confusion in regulations, inconsistent/confusing implementation.
We also study three types of ABT that can directly or indirectly affect the subject companies:
type A - the administrative barrier imposed on the subject companies by foreign government;
type B - the administrative barrier that the local government imposes on the subject companies’ trading partners; and
type C - the administrative barrier that the local government imposes on the subject companies’ business with other PBEC economies.
For the type A ABT, we asked the companies to identify the PBEC economies that most often practice those ABT. For the type B of ABT, we asked the company to list the PBEC economies of its trading partners. For the type C of ABT, we asked the company to list the PBEC economies with whom that the company is doing business. There are 102 companies that have encountered the type A of ABT (over 72% of the total number of responses) and 38 of them are manufacturing companies. Around 30 companies have encountered the types B and C ABT respectively and around 10 of each group of companies are manufacturing companies. The following is a summary of the responses.
2.1. ADMINISTRATIVE BARRIERS THAT FOREIGN PBEC ECONOMIES IMPOSE ON THE RESPONDENTS
The ten most reported ABT that foreign economies impose on the subject companies are shown in Table 2.3. Five of them are related to restrictions on market access, they are "restrictions on foreign ownership", "officially sanctioned monopoly/cartel", "excess documentation requirement", "restrictive property rights & commercial presence" and "unfair tax treatment". Only two ABT, "difficulty in obtaining visa" and "quota on number of foreign/local workers", are from restrictions on personnel. All ABT under the category of transparency of regulatory information are included. Among the five ABT, restrictions on market access, except the "excess documentation requirement", are also indicated to have the most important impact on the subject company’s business.
Table 2.3: Ten Most Reported ABT that Foreign PBEC Economies Impose on the Respondents| Ten Most Reported ABT | Frequency (%)c |
Restrictions on foreign ownershipa,b |
61 (42.1%) |
Inconsistency/confusion in regulationsa |
59 (40.7%) |
Difficulty in obtaining visa |
58 (40.0%) |
Inconsistency/confusion in implementation |
54 (37.2%) |
| Officially sanctioned monopoly/cartela,b | 51 (35.2%) |
| Excessive documentation requirement | 51 (35.2%) |
| Lack of publicity of regulations | 49 (33.8%) |
Restrictive property rights & commercial presencea,b |
47 |
| Unfair tax treatmenta,b | 46 (31.7%) |
| Quota on Number of Foreign/local Workers | 37 (25.5%) |
a
The top five most reported ABT that have impacts on business.In measuring the degree of difficulty to overcome the ABT, we asked companies to use a scale from 1 to 5, where 1 = "not difficult" and 5 = "very difficult". Figure 2.1 plots a histogram of the average degree of difficulty to overcome the ten most reported ABT. The most difficult ABT to overcome is "inconsistency/confusion in implementation of trade regulations" (degree = 4.3) whereas "the difficulty of obtaining visa" (degree = 2.9) is the least difficult one. For the remaining ABT, the range of difficulty is between 3.6 to 4.
Table 2.4: Four Most Reported ABT that Foreign PBEC Economies Impose on the Respondents from Manufacturing Sectors
| Four Most Reported ABT | Frequency (%)a |
Difficulty to Overcome |
| Inconsistency/confusion in regulations | 26 (67%) | 3.7 |
| Unfair tax treatment | 25 (64%) | 3.5 |
| Difficulty in obtaining visa | 23 (59%) | 3.0 |
| Inconsistency/confusion in implementation |
23 (59%) | 4.1 |
a
The percentage is in term of the total number of responses in manufacturing sectors.The ABT in services sectors are "restrictions on foreign ownership", "difficulty in obtaining visa", "officially sanctioned monopoly/cartel" and "inconsistency/confusion in implementation".
Table 2.5: Four Most Reported ABT that Foreign PBEC Economies
Impose on the Respondents from Services Sectors
| Four Most Reported ABT | Frequency (%)a |
Difficulty to Overcome |
| Restrictions on foreign ownership | 30 (63%) | 4.0 |
| Difficulty in obtaining visa | 27 (56%) | 3.0 |
| Officially sanctioned monopoly/cartel | 24 (50%) | 4.3 |
| Inconsistency/confusion in implementation |
23 (48%) | 4.3 |
a
The percentage is in term of the total number of responses from service sectors.It seems that services sector firms are more concerned about market access such as "officially sanctioned monopoly/cartel", whereas manufacturing firms seem to be more concerned about the "unfair tax treatment". In addition, it seems that "difficulty in obtaining visa" and "inconsistency/confusion in implementation" are not sector specific.
2.2. ADMINISTRATIVE BARRIERS THAT LOCAL GOVERNMENT IMPOSES ON THE RESPONDENTS’ PBEC TRADING PARTNERS
Table 2.6 summarizes the top seven most reported ABT imposed by the local economies on the subject companies’ PBEC partners. Overall, less than 4 respondents from any economy reported that their local government imposed administrative barriers on the foreign trading partners. "Difficulty in obtaining visa" is the ABT with the most complaints (20 cases) although the respondents did not think that this problem was difficult to overcome (the average degree of difficulty is 2.8). Among ABT that received at least 12 complaints, "restrictions on foreign ownership", "government procurement", "inconsistency/confusion in regulation" and "inconsistency/confusion in implementation" have an average degree of difficulty to overcome exceeding 3.
Table 2.6: The Most Reported ABT that the Local Government
Imposes
on the Respondents’ PBEC Trading Partner(s)
| The Most Reported ABT | Frequency (%) c | Difficulty to Overcomed |
| Difficulty in obtaining visaa | 20 (61%) |
2.8 |
| Restrictions on foreign ownershipa,b | 16 (48%) |
3.9 |
| Government Procurement | 13 (39%) |
3.2 |
| Excessive documentation requirement | 13 (39%) |
2.9 |
| Inconsistency/confusion in regulation | 12 (36%) |
3.4 |
| Inconsistency/confusion in implementation | 12 (36%) |
3.4 |
| Lack of publicity of regulations | 12 (36%) |
2.8 |
a
The top two most reported ABT that have impacts on business.Most respondents also reported that "restrictions on foreign ownership" has the most important impact on business. The second ABT regarded as the barriers with most impact on business are "difficulty in obtaining visa". Although "excessive documentation requirement" and "lack of publicity of regulations" are not regarded to be very difficult to overcome, interestingly, the "excessive documentation requirement" is among the top five ABT that have the most important impact on business. Other ABT, such as "anti-dumping policy", "quotas" and "unfair tax treatment", have an important impact on business even though they appear less often.
2.3. ADMINISTRATIVE BARRIERS THAT LOCAL GOVERNMENT IMPOSES ON THE RESPONDENTS |
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Table 2.7 summarizes the ABT that local government imposes on the subject companies. Most respondents (17 cases) suggested that "restrictions on foreign ownership" by the local government affected their operations with other economies. The average degree of difficulty to overcome this ABT is mild (3.1). Among the other top eight ABT, "inconsistency/confusion in regulations", "inconsistency/confusion in implementation", "officially sanctioned monopoly/cartel" and "unfair tax treatment" have an average degree of difficulty to overcome higher than 3, while those of "difficulty in obtaining visa", "quota on number of foreign/local workers" and "restrictive property rights & commercial presence" are below 3.
Table 2.7: The Most Reported ABT that Local Governments
Impose on the Respondents’ Business with Other PBEC Economies
| The Most Reported ABT | Frequency(%)c | Average Degree Difficulty to Overcomed |
| Restrictions on foreign ownershipa | 17 (55%) |
3.1 |
| Difficulty in obtaining visa | 16 (52%) |
2.7 |
| Inconsistency/confusion in regulations | 15 (48%) |
3.5 |
| Inconsistency/confusion in implementationb | 15 (48%) |
3.5 |
| Unfair tax treatmenta | 14 (45%) |
3.3 |
| Official sanctioned monopoly/cartela,b | 14 (45%) |
3.2 |
| Quota on number of foreign/local workers | 14 (45%) |
2.7 |
| Restrictive property rights & commercial presence | 14 (45%) |
2.5 |
a
The top three most reported ABT that have impacts on business."Officially sanctioned monopoly/cartel" is most frequently reported as the ABT that has an impact, and has the most important impact on business. "Restrictions on foreign ownership" and "unfair tax treatment" are other barriers regarded to have an important impact on business. Another barrier with important an impact on business is the "inconsistency/confusion in implementation".
In the above two sub-sections, we found that ABT related to market access are the main concern to local companies that are doing business overseas. Therefore, reduction of those ABT will be supported by local companies and will provide more business opportunities in the Pacific Basin region. We think it is beneficial to the region to have further research done on the problem of administration barriers to trade related to market access. In the next chapter, we will focus our attention on the implementation and transparency problems of regulations.
3. Problems in the Application of Trade Regulations |
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In this section, the respondents are asked to assess the severity of four types of application problems of trade regulations in two PBEC economies of their choices. These problems are the lack of clarity and inadequate coverage of trade regulations, inconsistency between trade regulations and their implementation, and the lack of publicity of trade regulations information to foreign companies.
3.1. DEGREE OF UNCLARITY AND INADEQUACY OF COVERAGE
The degree of unclarity of trade regulations is ranked on a scale of 1 to 5, where 1 means "clear" and 5 means "very unclear". The trade regulations of the 20 PBEC economies cover a wide range of unclarity. There are six economies that have an average degree of unclarity above 3, six economies lie between 2 and 3, and seven of them below 2. The average degree of unclarity among the six developed economies, namely Australia, Canada, Hong Kong, Japan, New Zealand, and the US, is 1.88. On the other hand, the average degree of unclarity in the remaining 13 developing PBEC economies is almost twice as much at 3.67.
The degree of inadequacy of trade regulations is also ranked on a scale of 1 to 5, where 1 stands for "adequate" and 5 means "very inadequate". The severity of inadequate coverage varies tremendously among the 20 PBEC economies. Six economies have an average degree of unclarity score above 3, seven economies are between 2 and 3, and six economies are below 2. The average degree of inadequacy among the six developed economies is 1.81 and that among the 13 developing economies is 3.44.
3.2. IMPLEMENTATION OF TRADE REGULATIONS
One of the problems encountered by companies in international trade is the inconsistency between stated trade regulations and their actual implementation, which may be more stringent or more lenient. Of the 70 respondents who selected the six developed economies, 80% of them (56) agree that these economies implement their trade regulations in line with the stated regulations. On the other hand, of the 113 respondents who chose the 13 developing economies, only 22% of them (25) believe that these economies implement their trade regulations according to the stated regulations. As for the other 88 respondents, 51 of them indicate that developing economies implement their trade regulation implementations in a more stringent manner than the stated regulation, while 37 of them thought they are more lenient. Therefore, it appears that when trade regulations are not implemented consistently, they are more often on the stringent side.
3.3. ACCESSIBILITY OF TRADE REGULATIONS
The accessibility of trade regulation information is not a serious problem for the PBEC economies. In 13 out of the 20 PBEC economies, over 75% of the respondents selecting them agree that foreign companies have equal access to trade regulation information as their local competitors. In the remaining six economies, at least 50% of the respondents believe that trade regulation information is not well publicized and foreign companies do not have equal access to the information as their local competitors.
In general, there seems to be a high degree of association among the four problems of application of trade regulations. In other words, an economy that has one problem tends to have the other three problems. Among the four application problems, accessibility of trade regulations information is the least serious one. Developed economies in general appear to have clear, adequate trade regulations, which are easily accessible and implemented according to their stated intents and contents. On the other hand, application problems of trade regulations do exist at different degrees of severity in the developing PBEC economies.
4. BUSINESS IMPACT OF THE OVERALL AMOUNT OF ADMINISTRATIVE BARRIERS |
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In this section, we report our findings about the overall evaluation of the impact of administrative barriers to trade (ABT) in the PBEC region. The evaluation is based on four criteria: (1) share of operating cost spent in dealing with ABT; (2) change in profit if all ABT were removed; (3) impact of ABT on firms’ expansion plan; and (4) presence of excessive ABT which makes firms withdraw from a market. Firms were also asked to indicate their sizes in terms of annual revenue in 1996. Firm sizes are evenly distributed among the respondents. The obtained results are unbiased in the sense that no firms of a particular size dominate in the survey.
In the questionnaire, firm sizes are classified into 10 groups from less than one million to more than five billion. The number of firms in these groups range from 6 to 26. The group that has the smallest number of firms (6 firms) is the one 1-5 million and the group that has the largest number of firms (26 firms) is the one 1-5 billion. The result is summarized in Table 4.1:
Table 4.1: Distribution of respondents in terms of their annual revenue in 1996
| annual revenue in 1996 (in US$) | number of firms |
| < 1 million | 7 |
| 1-5 million | 6 |
| 5-20 million | 14 |
| 20-50 million | 10 |
| 50-100 million | 11 |
| 100-300 million | 13 |
| 300-500 million | 7 |
| 500 million - 1 billion | 15 |
| 1-5 billion | 26 |
| > 5 billion | 22 |
| total number of firms | 131 |
4.1. SHARE OF OPERATING COST SPENT IN DEALING WITH ABT
Fifty nine firms out of a total of 114 (or 51.8%) indicated that they spent less than 1% of their operating cost in dealing with ABT in 1996, and 28 firms (24.6%) spent 1-5% of their operating cost on ABT. This seems to suggest that firms are not spending a significant amount in dealing with ABT in the PBEC region. However, this result has to be interpreted more carefully since there may be selection bias. The reason is that firms tend to choose to operate in markets with fewer ABT. It is likely that the cost reported here is downward biased. In order to have a more objective evaluation, the results from other criteria need to be considered together.
4.2. CHANGE IN PROFIT IF ALL ABT WERE REMOVED
Firms were then asked to estimate the change in their profit if all ABT faced by them were removed. Profit is a more comprehensive measure than cost since it also covers the revenue side. Around one half of the firms estimated that their profit would increase by more than 5% (see Table 4.2 for the complete result). Selection bias also exists here and it underestimates the increase in profit. Firms which suffer a great loss in profit will choose not to operate in economies with excessive ABT. The next two results will give a more clear cut picture.
It may be interesting to note a sector dependent phenomenon. A more detailed breakdown of the survey result shows that the estimated increase in profit for service firms is greater than the manufacturing firms.
Table 4.2: Increase in profit for firms if all ABT faced by them were removed
| Increase in profit in 1996 | number of firms |
| 0-5% | 41 |
| 6-10% | 16 |
| 11-20% | 10 |
| 21-30% | 8 |
| 31-100% | 4 |
| total number of firms | 79 |
4.3. IMPACT OF ABT ON FIRM’S EXPANSION PLANS
In this question, firms were asked whether they have decided to defer/abandon plans for expansion because of the awareness of ABT in some PBEC economies. Thirty-three firms out of a total of 131 (25.2%) indicated that they have had such an experience. It suggests that a significant number of firms (around a quarter of the firms) are affected when they plan to expand their operation in the PBEC region. The problem of selection bias is not important here. Even if it exists, it reinforces the result since some firms that foresee difficulty in expansion will choose not to expand in the first place. A closer look at the survey results reveal that there are more manufacturing firms reporting deferral/abandon experience.
4.4. WITHDRAWAL FROM A MARKET
Firms were asked whether they have withdrawn from a particular market because they find that ABT in this PBEC economy are too excessive. Fifteen firms out of a total of 132 (11.4%) reported that they have done so. As expected, the problem is not as serious as the previous one since withdrawal is a drastic action. The fact that firms encounter problems in setting up their business in some PBEC economies cannot be ignored. Some PBEC economies may not realize that the ABT imposed by them can be detrimental to their economic development.
Although firms do not spend a high portion of operating cost in dealing with ABT and their profit is not seriously affected by the presence of ABT in the PBEC region, there exists clear-cut evidence showing that the presence of ABT makes a significant amount of firms defer/abandon their expansion plan and even withdraw totally from a market. The negative impact of ABT on business reveals the urgent need to remove excessive ABT.
5. POLICY RECOMMENDATIONS |
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The objective of Section 5 of the survey "Policy Measures to Reduce Administrative Barriers to Trade" was to ask opinions of the PBEC business community on: (1) the underlying economic and political factors that lead to administrative barriers to trade (Question 5.1 in the questionnaire), and (2) the effectiveness of certain policy measures to address and reduce outstanding ABT (Questions 5.2 and 5.3). More than 86% of the respondents have answered at least one of the three questions. The answers proved to be interesting and provided suggested directions for policy recommendations.
5.1. THE BIGGEST OBSTACLE IN REDUCING ADMINISTRATIVE BARRIERS TO TRADE AND THE REASONS WHY IT IS DIFFICULT TO OVERCOME
A number of suggestions were made; however, the dominant view appears that the biggest obstacles are: (1) lack of understanding of how costly ABT are to business and to an individual economy, and (2) lack of unilateral incentives, and thus government commitment, to reduce ABT. For obstacle (2), both political and economical reasons are mentioned by the respondents. On the political side, there exist domestic special interests, including government bureaucracy itself. National sentiments may also play a role, especially in developing economies. On the economic side, PBEC economies are at different stages of development: developing economies may want to protect their "strategic" sectors while developed economies may want to protect their declining sectors.
A number of the respondents indicated the lack of understanding of the needs of modern business by government agencies as the biggest obstacle. As a consequence, existing regulations and administrative procedures which were established years ago are outdated. This may be particularly true in less developed PBEC economies.
5.2. POLICY MEASURES THAT CAN HELP TO REDUCE ABT
A. Set up a regional arbitration body to handle disputes related to ABT
The opinion is divided, with 71 "yes", 45 "no" and 29 "no answer". For those who say "no" to setting up a regional arbitration body, the reasons include: (1) it will lack authority, and past experience shows such an agency will not work effectively among nations; (2) this will create another layer of bureaucracy; and (3) this means setting up a strong/powerful infrastructure in addition to the WTO process. They in general are pessimistic about the implementation and the effectiveness of dispute settlement mechanisms among PBEC economies. For those who say "yes" to setting up a regional arbitration body, most did not write down their reasons.
B. Harmonisation of trade regulations and administrative procedures
In contrast to part A, the overwhelming view here is that harmonisation of trade regulations and administrative procedures can help reduce ABT. There are 111 (out of 145) "yes" vs. 12 "no". (The other 22 did not answer the question.) Those who said "no" to harmonisation of trade regulations and administrative procedures were mainly concerned about potential conflict interests among different economies and, thus, difficulty in implementation.
C. Whether Developed Economies Should Reduce Their ABT Earlier Than Developing Economies
The majority of the respondents answered "yes" (101 out of total 145). Almost all the companies residing in developing economies agreed with the two-track approach. On the other hand, the majority of the "no" companies reside in developed economies. There were 20 respondents who did not answer the question.
For those who do not think developed economies should reduce their ABT earlier, the reasons cited include: (1) this is against the idea of free trade and free trade benefits all countries; in effect, the developing economies have more to gain from an open system; (2) it slows down the changes required, which will be detrimental to the developing economies; (3) developed economies have already had lower ABT, and now the main problem lies with developing economies; (4) it may not be easy to define "developed" economies.
For those who support the two-track approach, the main argument seems that different development stages among PBEC economies should be recognised. Furthermore, the PBEC members differ greatly in their current levels of ABT. One requirement for lowering ABT is an efficient administrative system (advanced information technology and trained personnel) which developing economies currently lack. The developed economies have both physical and human capital, and by reducing their ABT first they may also set clear timetables and deadlines for developing economies to follow. Finally, it is worth noting that a number of the respondents, while supporting the two-track idea, pointed out that it is also vital to set a clear timetable and deadline for developing economies to reduce/eliminate their ABT.
D. Other Policy Suggestions
Based on the survey results and our own research on various policy initiatives at APEC and the WTO, we recommend the following initiatives to reduce administrative barriers to trade. Note that we focus our recommendations on the ten most reported ABT that PBEC economies impose on PBEC companies. The short- term plan consists of policy measures dealing with those aspects of ABT that were identified in our survey as less problematic and relatively easy to overcome, which we wish to implement within 5 years from now. We divide the policy recommendations into four main areas: (1) Improving transparency of trade regulations; (2) enhancing market access; (3) promoting mobility of business personnel; and (4) enhancing good trade policies and practices.
In the area of Improving Transparency of Trade Regulations, we have the following recommendations related to:
(i) Publicise Regulations in dealing with ABT of Lack of Publicity of Regulations
comply fully with 1994 GATT/WTO Agreement (Article 10) requirement to publish promptly
publicise the APEC database through the Internet and ensure accessibility of the Internet (related with Part II of GATS and Open Investment Regime Policy under MAPA)
maintain trade and investment policies and guidelines with reasonable consistency (in line with the third edition of the Guide to APEC Investment Regimes and Open Investment Regime Policy under MAPA)
apply the policies and guidelines to all companies on an equal basis
(ii) Enhance Transparency of Customs Rules and Procedures in dealing with ABT of Inconsistency/confusion in Regulations
regularly examine existing customs practices and institute a program of reform for those procedures that are identified as inefficient or redundant (the principle is in line with some concrete measures suggested in MAPA under the section of Reducing the Cost of Doing Business)
ensure transparency of any changes to existing policies, procedures, and operations of customs (related with part of Agreement of Rules of Origin of GATT/WTO)
(iii) Mutually Recognise Standards and Conformance in dealing with ABT of Inconsistency/confusing Implementation
develop mutual recognition arrangements for standards and share technical assistance on standards (in line with Mutual Recognition Arrangement under APEC and some recommendations under the sections of Standard and Conformance in the Osaka Plan and Reducing Cost of Doing Business in MAPA)
In Enhancing Market Access, we made the following recommendations:
(i) Increase Foreign Firms Participation in the Following Sectors: Insurance, Tourism, Retail Trade, Business/Professional Services, Freight and Passenger Transport (Restrictive property rights & commercial presence)
reduce the limits on the number of foreign operations
lift the cap on foreign equity
allow professional services firms to use their own names in the host economies
eliminate the limits on the number of foreign operations, and the cap on foreign equity in 10 years’ time
(ii) Improve the Competitive Environment in the APEC Region, which is in line with some recommendations under the same heading in MAPA (Officially sanctioned monopoly/cartel)
establish a deregulation unit in each economy which works with the private sector
publish annual reports detailing deregulation measures taken by each economy
establish a regular forum to share the experience, especially from the business sector, on the design and implementation of removal of monopolies/cartels
in the event of the privatisation of these companies, foreign companies should be treated on a non-discriminatory basis
investigate how various forms of monopoly activities and anti-competitive practices translate into trade barriers
identify the anti-competitive practices with trade effects in the region, and assess the economic impacts of these practices to regional trade
build consensus on the objectives of competition policy and on some basic guiding principles for its evolution
specify timetables of removal of monopolies and cartels by adopting the two-track approach: allow the developing economies to have slower deregulation timetable than the developed economies
ensure that all enterprises operating in a given economy have equal access to domestic markets and resources in 10 years’ time
(iii) Provide an Open Investment Regime in dealing with ABT of Restrictions on foreign ownership, the measures below are closely related to the principles set out in the Section on Providing an Open Investment Regime in MAPA
identify sensitive sectors for each specific economy and open all the other sectors to foreign investments with specified timetables
treat international investors impartially, in accordance with national and international law (national treatment)
ensure the transparency and the accessibility of investment policies by publicising the Guide to APEC Investment Regime through the Internet
enforce "standstill" obligation in opened sectors
ease restrictions substantially on foreign investments in sensitive sectors and adopt policies which permit international investors to own and manage their enterprises to the extent necessary to maximise their ability to obtain an adequate return in 10 years’ time
(iv) Reduce Documentation Requirement which is in line with some recommendations in Reducing the Cost of Doing Business in MAPA (Excessive documentation requirement)
computerise customs procedures according to the WTO Agreement on Customs Valuation Principles
mutually recognise international standards on electrical and electronic appliances, food labelling and machinery, according to the Mutual Recognition Arrangement under APEC
speed up the work on the Mutual Recognition Arrangement on Conformity Assessment
standardise computer applications for the customs processing of commercial and financial transactions among APEC economies
achieve common, agreed standards of quality and performance on building materials, electrical and electronic equipment and appliances safety, heating and cooling equipment, and medical devices
standardise customs procedures among APEC economies
(v) Fair Tax Treatment (Unfair tax treatment)
eliminate discriminatory taxation of income or production, except the sensitive sectors. All value-added taxes are included into the total tax treatment
keep floating taxes in reasonable range if they are adopted
achieve the goal of no less favourable taxation to foreign enterprises
avoid double taxation
We recommend two short term measures in
Promoting Mobility of Business Personnel, which are related to some suggestions in Easing Mobility of Business People under MAPA):(i) Promote Business Travel (Difficulty in obtaining visa)
revise regulations and other policies to facilitate the movement of business travellers
issue APEC-wide business travel card by the end of 1997
streamline arrangements for temporary residency of business people in the medium term (implement within 10 years from now)
(ii) Loosen Quota on Foreign Personnel (Quota on number of foreign/local workers)
permit foreign enterprises to employ foreign personnel, particularly during the early stages of development
issue work permits to the spouses of business people
grant foreign personnel permits with extended lengths of stay
In 5 years’ time, we suggest the implementation of the following policies to enhance Good Trade Policies and Practices, which are also consistent the idea of promoting best practices in Public/Private partnership under MAPA:
(i) Promote Domestic Education And Dissemination
conduct further studies on economic impacts of administrative barriers to trade on each economy
dedicate resources to publicise information on the costs of administrative barriers to trade to each economy
(ii) Ensure Participation of Business in Trade Policy and Trade Policy Making
establish an administrative barriers to trade symposium series with the aim of fostering engagement between government officials and business representatives in the Pacific Basin region
participate in the negotiation of the APEC MRA on telecommunications equipment with a view toward signing the Agreement at the APEC Telecom Ministerial meeting in June, 1998 (results from the MRA Annex, which lists Technical Regulations and Equipment Certification Requirements of each signatory)
APPENDIX A: QUESTIONNAIRE |
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This questionairre will be available shortly in a different format |
APPENDIX B: SUMMARY OF GATT RELATED TO ABT |
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AGREEMENT ON SANITARY AND PHYTOSANITARY MEASURES
In order to harmonise sanitary and phytosanitary measures on as wide a basis as possible, members are encouraged to base their measures on international standards, guidelines, and recommendations where they exist. It is expected that members would accept the sanitary and phytosanitary measures of others as equivalent if the exporting country demonstrates to the importing country that its measures achieve the importing country’s target level of health protection. The agreement includes provisions on control, inspection, and approval procedures. Governments must provide advance notice of new or changed sanitary and phytosanitary regulations, and establish a national inquiry point to provide information.
AGREEMENT ON TECHNICAL BARRIERS TO TRADE
The agreement encourages countries to use international standards where these are appropriate. Innovative features of the agreement are that it covers processing and production methods. The coverage of conformity assessment procedures is enlarged, and disciplines are made more precise. Notification provisions applying to local government and non-governmental bodies are elaborated in more detail. A Code of Good Practice for the Preparation, Adoption and Application of Standards by standardising bodies is included.
AGREEMENT ON TRADE RELATED ASPECTS OF INVESTMENT MEASURES
The agreement states that no member shall apply any TRIM inconsistent with Article III (national treatment) and XI (prohibition of quantitative restrictions) of the GATT. To this end, an illustrative list of TRIMs agreed to be inconsistent with these articles is appended. The agreement requires mandatory notification of all non-conforming TRIMs and their elimination within 2 years for developed countries, within 5 years for developing countries, and within 7 years for least-developed countries. It establishes a committee on TRIMs which will monitor the implementation of these commitments. The agreement also provides for consideration as to whether it should be complemented with provisions on investment and competition policy.
AGREEMENT ON IMPLEMENTATION OF ARTICLE VI (ANTI-DUMPING)
The agreement provides for greater clarity and more detailed rules in relation to the method of determining whether a product is dumped, the criteria to be taken into account in a determination that as to whether dumped imports have injured a domestic industry, the procedures to be followed in initiating and conducting anti-dumping investigations, and the implementation and duration of anti-dumping measures. In addition, it clarifies the role of settlement panels in disputes relating to anti-dumping actions taken by domestic authorities.
AGREEMENT ON PRESHIPMENT INSPECTION
The obligations placed on preshipment inspection (PSI) by user governments include non-discrimination, transparency, protection of confidential business information, avoidance of unreasonable delay, the use of specific guidelines for conducting price verification and the avoidance of conflicts of interest by the PSI agencies. The obligations of exporting members towards PSI users include non-discrimination in the application of domestic laws and regulations, prompt publication of such laws and regulations, and the provision of technical assistance where requested. The agreement also establishes an independent review procedure to resolve disputes between an exporter and a PSI agency.
AGREEMENT ON RULES OF ORIGIN
The agreement sets up a harmonisation program, to be initiated as soon as possible after the completion of the Uruguay Round, and to be completed within three years of initiation. It would be based upon a set of principles, including making rules of origin understandable and predictable. Until the completion of the program, contracting parties would be expected to ensure that these rules of origin are transparent; that they do not have restricting, distorting or disruptive effects on international trade; that they are administered in a consistent, uniform, impartial and reasonable manner; and that they are based on a defined standard.
AGREEMENT ON IMPORT LICENSING PROCEDURES
The revised agreement strengthens the principle of transparency and predictability. With respect to automatic licensing procedures, the agreement sets out criteria to reduce trade restrictive effects. As for non-automatic licensing procedures, administrative burdens for importers must be limited to what is absolutely necessary. It also sets a maximum of 60 days for applications to be considered.
AGREEMENT ON SAFEGUARDS
The agreement stipulates that members shall not seek, take, or maintain any voluntary export restraints, orderly marketing arrangements or any other similar measures. Such measures have to conform with the agreement, or be phased out by the end of 1998. An exception could be made for one specific measure for each importing member, subject to mutual agreement between the directly concerned members, where the phase-out date is December 31, 1996. All existing measures taken under Article XIX of the GATT 1947 shall end eight years after the date on which they were first applied or by the end of 1999, whichever comes later.
GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)
Part I of the agreement defines its scope. Part II contains a most-favoured-nation (MFN) obligation. Conditions for specific MFN exemptions are included as an annex; they provide for reviews after 5 years and a normal limitation of 10 years on the duration of such exemption.
Transparency requirements include publication of all relevant laws and regulations. The provisions covering economic integration are analogous to those in Article XXIV of GATT, requiring arrangements to have "substantial sectoral coverage" and to "provide for the absence or elimination of substantially all discrimination" between the parties. The agreement encourages recognition requirements achieved through harmonisation and internationally-agreed upon criteria. While parties are obliged not to restrict international transfers and payments for current transactions, there are provisions allowing limited restrictions in the event of balance-of-payments difficulties.
Part III contains provisions on market access and national treatment. Part IV establishes the basis for progressive liberalisation in the services area through successive rounds of negotiations and the development of national schedules. Part V contains institutional provisions, including consultation and dispute settlement and the establishment of a Council on Services.
The first annex concerns the movement of natural persons. It permits a government to negotiate specific commitments applying to the temporary stay of people providing a service. The annex on financial services establishes the right of a government to take prudent measures and to ensure the integrity and stability of the financial system. The annex on telecommunications requires non-discriminatory access to the public telecommunications networks. The last annex relates to air transport services. It states that GATS will apply to airplane repair and maintenance, ticket marketing, and computer reservation services.
APPENDIX C: SUMMARY OF REGIONAL AGREEMENTS RELATED TO ABT |
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There are three regional trade partnerships: NAFTA, ASEAN and EU. All of them have made some commitments in reducing ABT. We summarise each of them as follows:
NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)
Competition Policies: The three member countries of NAFTA did not make concrete agreements on competition policies. Each member is still free to adopt anti-competitive laws, to appoint monopolies or to maintain state enterprises. The NAFTA set up a Working Group on trade and competition policies following the agreement signed in 1992. However, no concrete proposals have yet been made.
Technical Barriers to Entry: All members observe each other's rights and obligations related to the standard-related measures under GATT Agreements on Technical Barriers to Trade. Each country is also able to adopt standard-related measures and levels of protection. However, there is an agreement that the standard-related measures follow the principle of national treatment which implies that each country cannot discriminate against the imports from other member countries compared with the local products in the application of standards and standards-related measures. A committee on standard-related measures has been established to monitor the enforcement of the agreement.
Free Trade Area of the Americas (FTAA): The FTAA was formally initiated in December 1994 in Miami. It is scheduled to reach an agreement among the countries in North America and Latin America in 2005. The current focus is how the FTAA will be organized. In the next FTAA trade ministerial in mid-May 1997 in Belo Horizonte, Brazil, this will be the main agenda. There are four approaches suggested for the shape and path of the FTAA: (1) One approach is that "core" countries make full commitments while the "periphery" countries receive market access benefits in exchange for tailored commitments, following EU's case. (2) Another approach is to combine the existing bilateral agreements or subregional agreements into a single agreement. (3) The third option is to have all countries make an agreement based on either the NAFTA or the Southern Cone Common Market (Mercosur). (4) The fourth path is to negotiate a new agreement coexisting with the current various agreements in the region.
ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN)
Trade: Customs surcharges were eliminated in 1996. Cooperation in customs has intensified, with the introduction of a Green Lane for CEPT products launched at the Fifth ASEAN Summit. The lane grants quick customs clearance to CEPT products. Member countries are also working on the harmonisation of tariff nomenclature, customs valuation, and customs procedures.
Industry and Investment: The new ASEAN Industrial Cooperation (AICO) scheme will promote cross-border industrial cooperation and encourage investment in technology-based industries and value-added activities. The scheme was signed in April 1996. An ASEAN Plan of Action on Cooperation and Promotion of Foreign Direct Investment and Intra-ASEAN Investment was endorsed by the Fifth ASEAN Summit. Also proposed at the summit were plans to establish an ASEAN Investment Area to facilitate greater direct investment. The Framework Agreement on Intellectual Property Cooperation and the Framework Agreement on Services, signed at the summit, will further promote foreign investment in ASEAN. The Coordinating Committee on Services and the various sectoral negotiating groups have been established to implement the agreement. A draft Work Programme for the ASEAN Consultative Committee on Standards and Quality (ACCSQ) for 1995-2003 has been formulated.
Asia-Pacific Economic Cooperation (APEC): Action Plans are being formulated according to the general principles and framework of the Osaka Action Agenda so as to realise APEC’s long term goal of free trade and investment in the region. The plans will be submitted to the APEC Ministerial Meeting in November 1996.
EUROPEAN UNION (EU)
Promoting Trade outside EU: The European Commission held a press release on February 15, 1996 for promoting more effective market access. The EU will focus on entering markets outside Europe. In doing so, the EU has to open markets for imports as well. The concrete steps include identifying trade barriers and setting priorities for removing the barriers; improving coordination among different departments of the European Commission; involving firms and industry for information gathering; establishing multilateral agenda for market opening, especially shaping the WTO agenda. The key proposals comprise: (1) The EU ensures that the trading partners respect the Uruguay Round commitments on sub-federal public contracts, regional integration initiatives, and intellectual property protection. (2) The EU pushes for further removal of trade barriers that were not removed in the Uruguay Round, such as: financial services; basic telecoms; maritime transport; rules and disciplines for services (rules covering subsidies, professional qualifications and the protection of personal data); rules of origin; customs duties; and government procurement. (3) The EU reflects the major concerns of European business. (4) The EU tries to ensure that agreements in WTO are compatible with the other policy objectives, such as environmental protection and the respect of internationally recognised labour standards.
Single Market (Informal Cooperation between Member States): Following a Council Resolution on June 16, 1994, networks are provided to solve the practical problems arising from barriers to movement of goods, services, and labour within a single market. Up to April 24, 1996, the Member States of the EU have so far established 1200 contact points. These contact points are concerned with administration of the enforcement of single market rules in 18 priority areas, namely: technical harmonisation, public procurement, firearms, dual used goods, general product safety directives; telecommunications; foodstuffs, animal and veterinary medicines; notification of technical regulations; customs and excise; taxation; drug precursors; cultural goods; right of establishment; company law; insurance, banking and securities; intellectual property; broadcasting; and transport. When an administration faces problems or questions in enforcement of single market rules, they now know which contact point they should touch. Businesses can also make use of the contact points.
Suggesting New Areas of Liberalisation: The EU is preparing to focus on some new areas for the Singapore conference of the WTO. These include: (1) Trade and investment. The EU is ready to push the principles of effective market access, national treatment, and non-discrimination. The restrictions on market access should be transparent. (2) Trade and competition. The EU currently realises that freedom of competition all over the world is a long term target. The best strategy is establishing a central body of binding basic competition standards. (3) Trade and environment. The balance between environmental protection and free trade should be maintained. Interpretation or revision on relevant General Agreements on Tariffs and Trade (GATT) may be necessary. (4) Trade and social conditions. The EU is going to initialise a WTO working party on the relationship between international trade and working conditions. Restrictions on the latter are already recognized by the International Labor Organization. (5) Trade-finance-currency linkage. Although the Uruguay Round identified how important it is that the IMF, World Bank, and WTO follow consistent policies on monetary and financial matters, the WTO has not yet addressed this aspect. The EU will reactivate the discussion and identify options on promoting greater monetary stability.
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