Short statement on ADMIN Barrier

Statement on Administrative Barriers

A SURVEY OF ADMINISTRATIVE BARRIERS TO TRADE

POLICY RECOMMENDATIONS

BACKGROUND

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.

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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.

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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.

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 (Restrictive property rights & commercial presence)^a	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 privatise government (telecom) facilities and allow foreign shareholding eliminate franchising requirement for foreign service providers	eliminate limits on the number of foreign operations eliminate caps on foreign equity eliminate exemptions to MFN and national treatment principles
Improve the competitive environment in the APEC region (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 nondiscriminatory 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 on regional trade build consensus on the objectives of competition policy and on basic guiding principles for its evolution	specify timetables of removal of monopolies and cartels by adopting the two-track approach: allow developing economies to have slower deregulation than the developed economies ensure that all enterprises operating in a given economy have equal access to domestic markets and resources
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

^{a The phrases in italics in parenthesis correspond to the ten ABT
most frequently reported in the survey}

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Policy Recommendations for Promoting Mobility of Business Personnel

Measures to Promote Mobility of Business Personnel	Short Term Plan (implement within 5 years)	Medium Term Plan (implement within 10 years)
Promote business travel (Difficulty in obtaining visa)	revise regulations and other policies to facilitate the movement of business travellers issue an APEC-wide business travel card by the end of 1997	streamline arrangements for temporary residency of business people
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 length of stay

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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)	comply fully with 1994 GATT/WTO Agreement (Article 10) requirement to publish promptly their laws, regulations, administrative guidelines and policies on any trade-related or investment-related issue publicise the APEC database through the Internet and ensure its accessibility maintain trade and investment policies and guidelines with reasonable consistency apply the policies and guidelines to all companies on an equal basis
Enhance transparency of customs rules and procedures (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 ensure transparency of any changes to existing policies, procedures and operations of customs
Mutually recognise standards and conformance (Inconsistency/confusing implementation)	develop mutual recognition arrangements for standards and share technical assistance on standards

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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	conduct further studies on economic impacts of administrative barriers to trade in each economy dedicate resources to publicise information on the costs of administrative barriers to trade in each economy
Ensure participation of business in trade policy and trade policy making	establish a symposium series on administrative barriers to trade in order to foster dialogue 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)

* The items should be in effect immediately.

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