Developing A Framework For Quantifying And Analysing Non-Tariff Measures

Program Overview

International trade is very important to United States agriculture, with 20 percent of all US farm products exported. U.S. agriculture and food industries produce and export a diverse array of products. In 2020, U.S. agricultural exports reached $150 billion compared to imports of $146 billion. All administrations have emphasized the need for open foreign market opportunities to expand U.S. exports for U.S. agricultural communities.

The ability of the U.S. to remain competitive in global agricultural markets depends not only preferential tariffs negotiated through trade agreements, but increasingly on non-tariff measures (NTMs), examples of which include non-automatic licenses, sanitary and phytosanitary (SPS) measures such as veterinary drug standards, maximum residue limits, and phytosanitary protocols, food safety and regulatory standards (i.e., maximum limits (MLs) on food additives), and control, inspection and approval procedures. NTMs are becoming increasingly important in regulating the access of the United States to several key markets for many of the major agricultural commodities. Thus, NTMs affect United States trade opportunities and the ability of rural America to thrive in a competitive global economy. While foreign tariffs remain high on some U.S. agricultural products, many economists agree that non- tariff obstacles are more obscure in nature and have the potential to be more trade distorting. Thus, in addition to tariffs, complex non- tariff issues remain and need to be assimilated into quantitative approaches to evaluate U.S. agricultural trade opportunities, as well as for the nearly four billion producers and consumers that reside in low income developing countries.

Among NTMs affecting agricultural trade, measures falling under the WTO’s Agreement on the Application of Sanitary and Phytosanitary measures occupy a special place. First, SPS measures are pervasive because of divergent perceptions about protection of plant and animal health, food safety and consumer information about product and quality standards among countries. Second, the SPS agreement permits WTO member countries to adopt their own health and safety regulations provided these measures are based on a scientific risk assessment, not discriminatory between countries with similar conditions, and are minimally trade distorting to prevent the disingenuous use as instruments of disguised protectionism. Third, SPS measures are the most frequently encountered NTMs in agricultural trade according to data collected by Grant and Arita (2017), the Trade Analysis and Information System (TRAINS), and the WTO’s Integrated Trade Intelligence Portal (I-TIP) and e-Ping alerts (Cadot and Gourdon 2018). They are also considered among the most relevant impediments to exports, according to a small sample of NTM business surveys conducted by the World Bank and International Trade Centre (World Bank 2008; ITC 2011).

Program Objectives and Priorities

USDA/FAS seeks applied research into identifying and quantifying the impact of NTMs on trade. To enhance understanding of NTMs and contribute towards creating and securing opportunities for U.S. agriculture and food products in foreign markets, the recipient will develop a robust modeling framework that capitalizes on the latest empirical developments to estimate and evaluate the economic costs of NTMs on U.S agricultural trade. The project should seek to fulfill the following objectives.

1) create an inventory of priority non-tariff measures of strategic interest for United States agricultural export interests.

2) Develop a robust modeling framework to evaluate the economic and trade effects of NTMs on U.S. and competing supplier exports in selected destination markets.

3) Illustrate with FAS how to convert NTM costs into suitable ad valorem equivalents (AVEs) for use in FAS/USDA ex ante modeling projections and strategic priorities for U.S. agricultural trade

Anticipated Likely Outcomes

FAS anticipates that this project will include an NTM database and corresponding documentation. The trade forecasts and the methods employed in generating them is likely to be available as machine readable data sets along with underlying code files. FAS would support a database could be search-enabled (individual country, commodity or time period search).

The project could result in a report describing the NTM modeling frameworks, setup and data requirements, illustrative results and interpretation of findings for policymakers, conversions using elasticity estimates, programming NTM impacts for use in simulation models, and conducting an in-person “how-to” modeling workshop. FAS also supports data/code sharing and a report, presentations in academic and government venues and journal articles reporting the results in peer reviewed and academic journals.

Education

• Public and state institutions of higher education