Project Overview

Pronto is focused on NTMs. What exactly are NTMS? NTMs comprise three separate but related groups of regulations and barriers. First, there are the barriers intended to impede entry into a country by foreign goods, multinational enterprises (MNEs), and/or workers. Barriers in this category include safety and environmental regulations on products (such as Sanitary and Phytosanitary Standards for agricultural goods); local ownership requirements limiting the extent of foreign direct investment (FDI); and visa requirements that restrict entry by certain groups of foreign workers. There are also other and more subtle barriers to foreign firms. One example is the higher price margin typically granted to domestic firms when bidding on government contracts. All of these measures aim to tilt the domestic market toward domestic producers. The second group of NTMs includes exceptions granted by governments to firms that fulfill certain requirements. For example, the EU offers large tariff reductions on imported goods from preferred (often developing) countries. For a firm to take advantage of these reductions it must meet rule of origin requirements whereby a sufficiently large share of the inputs are derived from the partner country. To do so, foreign firms must undertake costly verification of the origin of their inputs. Such verification is one type of NTM. Studies have shown that even when these costs are small, the uptake of preferences is low. This suggests the presence of substantial unmeasured barriers (including informational and other regulatory costs). Thus, even when markets appear “free”, regulations can be designed to restrict activity by foreign firms. These requirements have become increasingly onerous with emergence of global value chains. The third group of NTMs supports outward trade and investment as opposed to imports. These often take the form of incentives offered to local firms rather than barriers to foreign ones. Examples include the US foreign sales corporation regulations (whereby exporting firms are able to shield a share of their exports from US taxes). In 2002, the EU successfully challenged these under the WTO, charging that they amounted to an export subsidy (thus illustrating how NTMs can achieve the same effects as traditional trade instruments). Other examples include special export zones and special processing zones. Because these exports compete directly with foreign firms (and have general equilibrium effects as well), it is impossible to discuss how these zones affect exports without considering as well their impact on imports. Thus, once again, NTMs can have a range of complex and surprising implications for trade and investment.

PRONTO has two activity streams. First is the consolidation of existing indicators of NTMs and the development of new indicators. The final output of this first activity stream will be the NTM Indicators Database (NID), a database publicly available on the Internet and regularly updated. The second stream of activity builds on this new database to develop new analytical methods to better understand the impact of NTMs on important economic and social objectives, as well as interaction of such objectives with market access conditions. The final output of this second activity stream will be a set of reports on analytical methods and assessment of key relationships between NTMs and socioeconomic objectives. These two broad sets of tasks are divided into three sets of work packages. The first set of work packages (WP1-WP3) maps to the task of database development. The second set (WP4-WP6) map to impact analysis. The final set (WP7-WP8) relates to dissemination and overall project management.