A partnership with academia

Building knowledge for trade and development

Vi Digital Library - Text Preview

G20 Policies and Export Performance of Least Developed Countries

Discussion paper by Nicita, Alessandro and Seiermann, Julia/UNCTAD, 2017

Download original document (English)

This volume of the Policy Issues in International Trade and Commodities Research Study Series provides an overview and analysis of G20 trade policies, in particular tariffs and non-tariff measures, and provides suggestions on how they could be improved to increase the export competitiveness of LDCs. It finds that G20 tariffs remain restrictive in several sectors of importance for LDCs. More importantly, the results indicate that the G20 countries’ regulatory frameworks and the corresponding non-tariff measures (NTMs) alter relative competitiveness to the advantage of exporters that are capable of efficient compliance with NTMs, therefore penalizing exports originating in LDCs. The paper concludes with recommendations and suggests progress in Aid for Trade initiatives and increases in technical assistance programmes, both on bilateral and multilateral levels will help minimize LDCs' costs of compliance with NTMs and facilitate the integration of LDCs in the global economy.

U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T


G20 POLICIES AND EXPORT PERFORMANCE


OF LEAST DEVELOPED COUNTRIES


POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


RESEARCH STUDY SERIES No. 75




POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


RESEARCH STUDY SERIES No. 75


G20 POLICIES AND EXPORT PERFORMANCE


OF LEAST DEVELOPED COUNTRIES


by


Alessandro Nicita


and


Julia Seiermann


UNCTAD, Geneva


New York and Geneva, 2016


U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T





ii POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Note




The purpose of studies under the Research Study Series is to analyse policy issues and to


stimulate discussions in the area of international trade and development. The Series includes


studies by UNCTAD staff and by distinguished researchers from other organizations and academia.




The opinions expressed in this research study are those of the authors and are not to be


taken as the official views of the UNCTAD secretariat or its member States. The studies published


under the Research Study Series are read anonymously by at least one referee. Comments by


referees are taken into account before the publication of studies.




The designations employed and the presentation of the material do not imply the


expression of any opinion on the part of the United Nations concerning the legal status of any


country, territory, city or area, or of authorities or concerning the delimitation of its frontiers or


boundaries.




Comments on this paper are invited and may be addressed to the author, c/o the


Publications Assistant, Trade Analysis Branch (TAB), Division on International Trade in Goods and


Services, and Commodities (DITC), United Nations Conference on Trade and Development


(UNCTAD), Palais des Nations, CH-1211 Geneva 10, Switzerland; e-mail: tab@unctad.org; fax no:


+41 22 917 0044. Copies of studies under the Research Study Series may also be obtained from


this address.




Studies under the Research Study Series are available on the UNCTAD website at


http://unctad.org/tab.





Series Editor:
Chief


Trade Analysis Branch
DITC/UNCTAD











UNCTAD/ITCD/TAB/77









UNITED NATIONS PUBLICATION


ISSN 1607-8291






© Copyright United Nations 2016
All rights reserved






G20 Policies and Export Performance of Least Developed Countries iii




Abstract






The Sustainable Development Goal (SDG) on strengthening the means of implementation and


revitalizing the global partnership for sustainable development has reiterated the commitment to


significantly increase the exports of Least Developed Countries (LDCs). LDC exports potential depends


on several factors, one of which is access to major markets. This study provides an overview and


analysis of G20 trade policies, in particular tariffs and non-tariff measures, and provides suggestions on


how they could be improved to increase the export competitiveness of LDCs. It finds that G20 tariffs


remain restrictive in several sectors of importance for LDCs. More importantly, the results indicate that


the G20 countries’ regulatory frameworks and the corresponding non-tariff measures (NTMs) alter


relative competitiveness to the advantage of exporters that are capable of efficient compliance with


NTMs, therefore penalizing exports originating in LDCs. In terms of achieving SDG, the findings of this


study indicate that tariff preferences should be seen as part of the approach to increase LDCs exports.


However, tariff preferences alone are not sufficient, as they would produce meaningful effects only for


a limited number of LDCs. Better market access through the facilitation of compliance with G20


regulatory frameworks would be essential to increase exports from LDCs. The impact of providing


LDCs with truly tariff-free market access to the G20 is quantified in an increase of exports of almost 10


billion US$, while eliminating the distortionary trade effects of NTMs would increase LDC exports to


G20 countries by about 23 billion US$. Taken together LDC total exports would increase by almost 15


per cent. While extending preferential schemes to cover 100 per cent of products and all G20 members


would be straightforward, reducing the distortionary trade effects of NTMs requires a much more


complex approach. In this regard, further progress in Aid for Trade initiatives and increases in technical


assistance programmes, both on bilateral and multilateral levels, to help minimize LDCs' costs of


compliance with NTMs would be essential to facilitate the integration of LDCs in the global economy.




Keywords: International trade; Tariffs; Non-Tariff Measures; Comparative Advantage; Least Developed


countries.




JEL Classification: F13, O24


















iv POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES





Acknowledgements


We are grateful to Marco Fugazza, Christian Knebel, Denise Penello Rial, Ralf Peters and
Giovanni Valensisi for comments and suggestions.

This paper represents the personal views of the authors only and not the views of the
UNCTAD secretariat or its member States. The authors accept sole responsibility for any errors
remaining.





G20 Policies and Export Performance of Least Developed Countries v




Contents






1 INTRODUCTION .......................................................................................................................... 1




2 LDCs TRADE PERFORMANCE .................................................................................................. 2




3 G20 TRADE POLICY AND LDCs ................................................................................................ 5


3.1 Tariffs ................................................................................................................................. 5


3.2 Non-Tariff measures .......................................................................................................... 8




4 ASSESSING THE IMPORTANCE OF G20 POLICIES FOR LDC TRADE ................................ 12


4.1 Econometric estimation ................................................................................................... 12


4.2 Economic assessment ..................................................................................................... 14




5 CONCLUSIONS ......................................................................................................................... 18




REFERENCES ......................................................................................................................................... 19








vi POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


List of figures




Figure 1. Value of LDC exports and exports as a share of global trade ............................................... 2


Figure 2. LDCs export over GDP ratios ................................................................................................ 3


Figure 3. LDCs export, by destination .................................................................................................. 3


Figure 4. LDCs export diversification in G20 markets, by product ...................................................... 4


Figure 5. African and Asian LDC export shares, by product ................................................................ 4


Figure 6. Average tariffs faced by LDCs in G20 markets, by product groups ..................................... 6


Figure 7. Tariff peaks for LDC exports in G20 markets, by product groups ........................................ 6


Figure 8. Tariffs escalation for LDC exports in G20 markets, by product groups ................................ 8


Figure 9. Preferential margins of LDCs in G20 markets, by product groups ....................................... 9


Figure 10. Incidence and costs associated with NTMs in G20 markets, LDCs vs non-LDCs ............. 11


Figure 11. Impact of duty free access and addressing distortionary effect of NTMs


on LDC exports to G20 countries, by product .................................................................... 15


Figure 12. Impact of duty free access and addressing distortionary effect of NTMs


on LDC exports to G20 countries, by LDCs ........................................................................ 16


Figure 13. Impact of duty free access and addressing distortionary effect of NTMs


on LDCs total exports, by G20 country ............................................................................... 17






List of tables




Table 1. Average applied rates on recorded trade items from LDCs .................................................. 7


Table 2. Share of LDC exports subject to NTMs in G20 markets ..................................................... 10


Table 3. Econometric results ............................................................................................................. 13








G20 Policies and Export Performance of Least Developed Countries 1




1. INTRODUCTION


The Sustainable Development Goal (SDG) on strengthening the means of implementation and


revitalizing the global partnership for sustainable development has reiterated the commitment to


significantly increase the exports of Least Developed Countries (LDCs). Target 17.11 aims to double


LDCs' global export share by 2020 (Target 17.11). Cooperation in the area of trade for economic


development dates back to the creation of UNCTAD in 1964 and was a major point of the WTO Doha


Development Round in 2001. The Doha Round Declaration stated that a central goal of the negotiations


was “to improve the trading prospects and to ensure that developing countries, and especially the


least-developed among them, secure a share in the growth of world trade commensurate with the


needs of their economic development”. More recently, the commitment to help LDCs with regard to


market access was formally reinstated at the end of 2015 in the Tenth WTO Ministerial Conference


Declaration, which stated that WTO members strongly commit to addressing the marginalization of


LDCs in international trade and will contribute to improve their effective participation in the multilateral


trading system. The argument behind helping LDCs to increase their exports is that a stronger


integration of their economies with international markets would benefit LDCs by providing resources for


facilitating the implementation of the other Sustainable Development Goals.


SDG Target 17.11 identifies a persistent problem of many of the weaker economies: the generally low


level of integration with international markets. Although LDCs represent around 12 per cent of the


world's population, their exports only amount to about one per cent of global exports. Moreover, LDCs'


international integration as measured by trade over GDP is about 22 per cent, significantly below the


average for developing countries of about 35 per cent. The causes behind the limited participation of


LDCs in world trade are complex and related to productive capacity, trade costs, and market access.


With regard to productive capacity and trade costs, LDCs' weaker economies, domestic constraints,


geographic isolation and unfavourable endowments make it relatively more difficult for them to access


and effectively compete in international markets. With regard to market access, the issues are complex


as well. On one hand, the international community has developed a number of initiatives facilitating


market access for LDCs, so as to better integrate them in the international trading system. On the other


hand, market access is increasingly determined by regulatory and technical requirements including


those stemming from non-trade objectives related to health and environmental protection (Sanitary and


Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT)) which may impose an additional


burden on LDCs (UNCTAD, 2012; Henson and Jaffee, 2008).


This study provides an overview and analysis of G20 trade policies, in particular tariffs and non-tariff


measures 1 , and provides suggestions on how they could be improved to increase the export


competitiveness of LDCs.2 It finds that G20 tariffs remain restrictive in several sectors of importance for


LDCs, in particular textiles, apparel and agricultural products. More importantly, the results indicate


that the G20 regulatory frameworks and the corresponding non-tariff measures (NTMs) alter relative


competitiveness to the advantage of exporters that are capable of efficient compliance with NTMs,


rather than exports originating in LDCs.


In terms of achieving SDG Target 17.11, the findings of this study indicate that LDCs would make


further gains if preferential schemes were extended to truly cover 100 per cent of products and all G20


members. However, preferential schemes alone would produce meaningful effects only for a limited


number of LDCs. Better market access from the facilitation of compliance with G20 regulatory


frameworks would be essential to increase exports from LDCs. The analysis of this study quantifies that


the exports from LDCs to the G20 would increase by about 10 billion US$ if preferential tariff schemes


were extended to cover 100 per cent of exports from LDCs. With regard to the regulatory framework,


LDC exports to G20 countries would increase by about 23 billion US$, equivalent to about a 10 per


cent increase if LDC exporters were able to comply with NTMs as well as non-LDC exporters. Taken



1 Other aspects of G20 trade policy which may affect LDC exports include protectionist measures (Evenett and Fritz, 2015)
and rules of origin (World Bank, 2015).


2 While SDG target 17.11 refers to trade in both goods and services, this study covers only trade in goods.





2 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




together, if G20 countries were to fully liberalize market access for LDCs and if the distortionary effect


of NTMs was eliminated, LDC total exports would increase by almost 15 per cent.


The remainder of this paper is organized as follows. Section 2 describes the export performance of


LDCs. Section 3 presents G20 policies in relation to LDCs. Section 4 presents the estimating


framework to assess the impact of G20 policies on LDC exports and discusses the results. Section 5


concludes.




2. LDCs TRADE PERFORMANCE


The goal of doubling LDCs' share of global exports by 2020 is ambitious. Although LDC exports have


substantially increased from about 83 billion in 2005 to about 220 billion in 2015, their share in global


exports increased only from about 0.8 per cent to about 1.2 per cent during the same period (Fig 1).




Figure 1: Value of LDC exports and exports as a share of global trade




Doubling this number in less than 5 years would require a strong commitment both with regard to


addressing productive capacity constraints and facilitating market access for LDC exports. Abstracting


from productive capacity, the importance of market access is emphasized by the statistics showing


LDCs' relatively low level of export over GDP ratio. In contrast with other developing countries, LDCs


generally trade much less than the size of their economy would suggest. Therefore, the doubling of the


LDCs' share in world trade has to result not only from increasing productive capacity but also from


exporting a higher share of their production. Increasing LDCs' export performance on a permanent


basis has proven very difficult because of their fragile economies and their over-reliance on


commodities. During the past 10 years LDCs' export over GDP ratios have been oscillating between 22


and 33 per cent. Since 2011 the ratio has declined and as 2015 it is about 22 per cent (Figure 2).




LDC exports in


billion US$


Share of LDCs in


world exports (%)


0


1


2


3


4


0


50


100


150


200


250


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


P
e


r
ce


n
t


B
il


li
o


n
U


S
$





G20 Policies and Export Performance of Least Developed Countries 3




Figure 2: LDCs export over GDP ratios




The pattern of weak international integration in terms of exports is widespread across LDCs, although


with some differences. Although some LDCs present an export over GDP ratio larger than that of


developing countries as a group, the majority of LDCs have an export over GDP ratio which is less than


20 per cent. Moreover, for a substantial number of LDCs, their export over GDP ratio has actually


declined since 2011.


Improving the economic integration of LDCs with the rest of the world depends on enhancing and


benefiting from market access opportunities, especially in relation to the major economies. Better


market access improves countries' competitiveness and leads to export diversification both in new


markets and new products (Nicita and Rollo, 2015). In this regard, policies regulating market access in


G20 countries are of fundamental importance as these markets account for about 85 per cent of world


GDP and represent more than 80 per cent of LDC exports Among the G20 markets, China, the


European Union and the United States are of major importance as they alone represent about 65 per


cent of LDC exports. An increase in LDC exports both to these three major economies and to other


G20 countries could make an important contribution to the target of doubling the share of LDCs in


world exports by 2020.


Figure 3: LDCs export, by destination




0%


5%


10%


15%


20%


25%


30%


35%


40%


45%


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


LDCs Developing Countries


China


European Union


United States


Other G20


countries


Other countries


0


50


100


150


200


250


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


B
il


li
o


n
U


S
$





4 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




Sustainably improving LDCs' weak export performance requires going beyond export values and


addressing export diversification. Although there is some heterogeneity, many LDC exports remain


concentrated in a few sectors, largely commodities related to natural resources.




Figure 4: LDCs export diversification in G20 markets, by product




The remaining exports to G20 are largely concentrated in agriculture (about 15 billion US$) and textile


and apparel (for about 40 billion US$). Moreover, LDCs tend to be specialized in their exports. This is


evident when comparing the export composition of LDCs in different country groups. 75 per cent of


exports of the group comprising African LDCs and Haiti are related to natural resources, with oil


contributing to about 70 per cent. On the other hand Asian LDC exports are relatively more diversified


but still very concentrated in textiles and apparel (about 54 per cent).


Figure 5: African and Asian LDC export shares, by product3





3 Island LDCs are included in the respective region they belong to.


0 20 40 60 80 100 120


Natural resources


Apparel and textiles


Other manufacturing


Agriculture


Billion US$


China


European Union


United States


Other G20 countries


Natural resources


Natural


resources


Apparel and textiles


Apparel and textiles


Other


manufacturing


Other manufacturing


Agriculture


Agriculture


0% 20% 40% 60% 80% 100%


Africa and Haiti


Asia





G20 Policies and Export Performance of Least Developed Countries 5




3. G20 TRADE POLICY AND LDCs


Most of the G20 economies joined the long trend of progressive liberalization of international trade.


Such liberalization has greatly improved market access to many of the G20 countries, especially in


relation to tariffs. Moreover, the proliferation of trade agreements, many of which involve G20 countries,


further liberalized market access, although in a more selective manner. Still, while G20 markets are now


more open in the traditional sense, market access has become increasingly regulated by other types of


more subtle regulatory measures. These trends had positive and negative implications of LDCs. While


tariffs cuts further liberalized market access, they also resulted in preference erosion in markets which


were already providing LDCs with forms of preferential access. The implications related to the wider


use of regulatory measures are more complex, as these measures can a produce substantial


distortionary trade bias against LDCs.


The international community generally recognizes LDCs' trade constraints and therefore provides LDC


exporters with mechanisms which facilitate trade, or at least do not impose additional burdens. Trade


arrangements differentiating LDCs from the rest of developing countries exist both at the multilateral


level, as well as at the bilateral level. With regard to the G20 countries, their policies try to facilitate


LDCs market access both by providing tariff preferences and by facilitating LDCs trade with regard to


forms of NTMs (e.g. quotas). The mechanisms through which more advanced economies aim to


provide LDCs with a policy driven competitive advantage take the form duty-free quota-free access,


broader lists of eligible products, softer rules of origins, Aid for Trade, and technical facilitation


programs to reduce trade costs and boost productive capacity so as to ultimately increase LDCs'


overall competitiveness.




3.1 TARIFFS


Many of the high income countries that are part of the G20 provide tariff preferences to LDCs on a non-


reciprocal basis under the General System of Preferences and also under specific arrangements (e.g.


the European Union's Everything But Arms). Non-reciprocal preferential access for LDCs is also


provided by some of the G20 developing countries such as China and India which have recently started


their own preferential schemes under the Global System of Trade Preferences among Developing


Countries. Most of the preferential schemes, although generous, are not without strings attached. A


general concern is that since they are unilaterally granted, they could be also unilaterally revoked,


therefore leading to uncertainty. Most importantly many preferential programs do not cover the full


range of products. Products of importance for LDCs especially with regards to agriculture, apparel and


textiles often remain in the exclusion list, and are therefore still subject to relatively high tariffs.


Moreover, administrative burden and stringent rules of origins may render some of the preferential


schemes ineffective (Laird, 2012).4


On average, tariffs that the G20 countries apply to imports from LDCs are very low, about 1.3 per cent


(trade weighted average). However, this low number is largely due to a composition of LDC exports


tilted towards natural resource commodities which generally face zero or very low tariffs. The simple


average tariff applied by G20 countries to LDC exports is 5.2 per cent. Moreover, there is a lot of


variation in the tariffs faced by LDCs across product groups. In particular, tariffs remain particularly high


in relation to textiles and apparel and many agricultural products (Figure 6).





4 While preference schemes available to LDCs are thus not always fully utilized, the analysis in this paper abstracts from
the question of utilization due to data limitations.





6 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




Figure 6: Average tariffs faced by LDCs in G20 markets, by product groups




Tariffs applied to LDC exports are also different across G20 countries. Table 1 reports the trade


weighted average tariffs that G20 countries impose on each LDC. The average tariff applied to LDC


exports is generally low. However, there are also some exceptions indicating that tariffs remain relevant.


In particular, in a number of cases LDCs face average tariffs up to about 10 per cent in some of the


G20 markets.


The overall low tariff applied to LDC exports is due both to the large share of products benefiting from


duty free access and to the composition of exports titled towards natural resource products which


generally face zero or very low most-favoured-nation (MFN) tariffs. However, there is still ample room to


improve LDCs market access by removing the remaining tariffs. In reality, tariffs still represent an


impediment for many products that are exported by LDCs. Tariff peaks – tariffs that are substantially


higher than the average - are present in many of the product groups of importance of LDCs (Figure 7).




Figure 7: Tariff peaks for LDC exports in G20 markets, by product groups




0


2


4


6


8


10


12


P
e


r
ce


n
t


Simple average Trade-weighted average


0


10


20


30


40


50


60


70


P
e


r
ce


n
t


Share of tariffs>5% Share of tariffs>15%





G20 Policies and Export Performance of Least Developed Countries 7




Table 1: Average applied rates on recorded trade items from LDCs


LDC
ISO3


code
China


European


Union


United


States
Other G20


Afghanistan AFG 0.12 0.00 1.44 4.36


Angola AGO 0.02 0.00 0.40 0.81
Bangladesh BGD 2.79 0.00 6.77 7.79


Benin BEN 1.79 0.00 0.00 10.53
Bhutan BTN 8.67 0.00 4.25 5.72


Burkina Faso BFA 6.84 0.00 0.93 9.47


Burundi BDI 0.00 0.00 0.00 9.30
Cambodia KHM 0.55 0.00 6.65 7.87


Central African Republic CAF 0.00 0.05 0.39 3.91
Chad TCD 1.67 0.00 0.00 2.66


Comoros COM 0.00 0.00 5.98 3.86


Congo, Democratic Republic of ZAR 4.77 0.01 0.44 0.70
Djibouti DJI 0.10 0.02 1.14 1.78


Equatorial Guinea GNQ 0.83 0.01 0.75 4.41
Eritrea ERI 0.68 0.00 1.33 6.33


Ethiopia ETH 0.41 0.02 0.55 8.55
Gambia GMB 3.96 0.00 0.32 2.86


Guinea GIN 0.74 0.00 1.27 2.77


Guinea-Bissau GNB 0.00 0.08 0.00 3.95
Haiti HTI 9.39 0.01 0.50 5.72


Kiribati KIR 10.60 0.00 0.03 3.05
Laos LAO 1.37 0.00 7.52 5.33


Lesotho LSO 1.22 0.00 0.00 0.41


Liberia LBR 3.86 0.00 1.11 6.23
Madagascar MDG 0.09 0.01 0.75 8.45


Malawi MWI 0.88 0.00 5.29 1.91
Mali MLI 0.33 0.00 0.88 4.08


Mauritania MRT 0.32 0.00 1.40 5.40
Mozambique MOZ 0.33 0.00 2.05 1.16


Myanmar MMR 0.78 0.00 7.73 6.95


Nepal NPL 0.27 0.01 5.71 6.87
Niger NER 0.02 0.01 0.43 4.10


Rwanda RWA 0.00 0.00 1.60 3.77
Sao Tome and Principe STP 3.54 0.00 0.30 2.80


Senegal SEN 0.84 0.00 0.53 5.02


Sierra Leone SLE 0.00 0.00 0.16 3.72
Solomon Islands SLB 3.87 0.00 1.81 1.63


Somalia SOM 0.89 0.00 0.00 3.88
South Sudan SSD 1.34 0.00 0.00 3.16


Sudan SDN 6.92 3.96 0.32 7.32
Tanzania TZA 0.48 0.01 0.99 1.90


Timor Leste TLS 0.00 0.00 3.96 1.81


Togo TGO 0.55 0.01 1.39 7.32
Tuvalu TUV 0.00 0.00 3.90 5.88


Uganda UGA 0.09 0.00 0.53 4.88
Vanuatu VUT 0.00 0.00 1.48 2.01


Yemen YEM 0.17 0.00 2.11 3.35


Zambia ZMB 0.72 0.00 2.86 0.34
Note: Figures reported are simple average tariffs for traded products.




In particular tariff peaks are still prominent in agricultural products with 20 per cent of tariffs above 15


per cent and about 40 per cent above 5 per cent. Tariffs peaks are also important in the apparel and


textiles sectors, in these sectors about 21 per cent of tariff lines are above 15 per cent, and about 55


per cent above 5 per cent.





8 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




Tariffs not only affect exports but also have the potential to affect export diversification. For example,


tariff structures are often designed to add taxes to processed products (tariff escalation) so as to retain


high value added process to the domestic economy. For the LDCs facing such tariff structure it may


hinder value addition and export diversification along the value chain. Even accounting for LDC


preferences, the difference in tariff between their primary exports and finished products is often large,


especially for the agricultural sectors (Figure 8). On average, the difference in the tariffs on primary vs


finished agricultural products is about 4 per cent.




Figure 8: Tariffs escalation for LDC exports in G20 markets, by product groups




The tariff structure and the system of preferences are also important in relative terms. That is in relation


to the tariff applied to LDCs' foreign competitors. Indeed, the tariff liberalization process of the last few


decades has resulted in preference erosion for LDCs and the proliferation of trade agreements implies


that there are many cases where LDCs face relatively higher tariffs than foreign competitors. Although


LDCs' preferential margins in G20 markets remain valuable, the benefits of preferential schemes are


often limited to sectors that have resisted MFN liberalization, or where the list of products exempted


from general preferences for developing countries is broader. LDCs' preferential margins vary across


typologies of products and remain valuable for vegetable products providing a tariff advantage of about


7 percentage points in entering G20 markets vis-à-vis foreign competitors. LDCs' preferential margins


are also substantial in other agricultural products as well as in the textiles and apparel sectors (between


4 and 6 percentage points).




3.2 NON-TARIFF MEASURES


Import tariffs are just one of the instruments affecting market access. More importantly, market access


depends on and is administered by a large and increasing set of regulations and requirements that


traded goods need to comply with. These regulatory measures are generally referred to as non-tariff


measures (NTMs) and include all sorts of policies which have direct or indirect effect on trade costs.


While some NTMs aim to directly affect trade (e.g. quotas, export restrictions, trade defence measures),


many NTMs do not have protectionist or trade restrictive intents. Most NTMs serve legitimate


objectives such as consumer or environmental protection (e.g. SPS and TBTs) or are instruments of


domestic and industrial policy which affect trade only indirectly (e.g. subsidies, administered price


mechanisms, financial measures, government procurement).


0
2
4
6
8


10
12
14
16
18
20


P
e


r
ce


n
t


Consumer goods Intermediate goods Raw materials





G20 Policies and Export Performance of Least Developed Countries 9




Figure 9: Preferential margins of LDCs in G20 markets, by product groups5






Although NTMs are often applied in a non-discriminatory manner to all goods independent of their


origin, NTMs pose a particular challenge for LDCs for two reasons. First, NTMs tend to be more


prevalent in products that are typically exported by LDCs such as agriculture, textiles and apparel


(UNCTAD, 2012).6 Second, NTMs can have a potentially distortionary effect on trade. This effect often


plays against low-income countries, and especially LDCs (Henson and Loader, 2001; Maskus et al.,


2005; Essaji, 2015; Murina and Nicita, 2016). For example, standards such as SPS and TBTs are


generally applied to imports in a non-discriminatory manner. However, the costs related to such


measures are often asymmetrical because their compliance depends on technical know-how,


production facilities, and an infrastructural base that, while usually available in developed and emerging


markets, is lacking in many LDCs (Athukorala and Jayasuriya, 2003). For this reason it is often the case


that regulatory trade framework have negative effects on the export competitiveness of LDCs (Disdier


et al., 2008).


Virtually all countries apply some forms of NTMs. However, the regulatory framework, and thus the


incidence of NTMs, is more pervasive in the advanced economies. Moreover, in these economies


NTMs tend to be more complex, as they are intended to serve a large number of policy objectives.


To summarize the extent to which G20 countries' NTMs affect LDC exports, Table 2 presents the share


of LDC exports that is affected by some forms of NTMs when entering G20 markets. In general, a


substantial share of LDC exports needs to comply with NTMs, but there is a lot of heterogeneity both


across LDCs and G20 economies. In general, LDCs which are more dependent on exports of natural


resources products tend to be less exposed to NTMs (e.g. Angola or Guinea). On the other hand, NTMs


are more relevant for countries whose exports are more concentrated in agricultural and manufacturing


products (e.g. Cambodia or Lesotho). This pattern is largely due to the fact that NTMs are less


pervasive in the natural resources sectors than in agriculture and manufacturing. Differences in the


share of LDC exports subjected to NTMs are also evident across destinations. These differences are


both due to diverse regulatory frameworks of G20 countries as well as to the composition of trade. For


example, the relatively low share of LCDs exports facing NTMs when entering China is largely due to


China being a large importer of natural resources from most LDCs.



5 Preferential margins were computed with respect to the average tariffs faced by other countries, not with respect to MFN
rates.


6 The exception is natural resources which generally face few forms of NTMs.


0


1


2


3


4


5


6


7


8
P


e
r


ce
n


t





10 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




Table 2: Share of LDC exports subject to NTMs in G20 Markets



China


European


Union


United


States
Other G20


Afghanistan 6% 48% 20% 10%


Angola 0% 6% 0% 2%


Bangladesh 33% 74% 91% 50%


Benin 15% 24% 5% 31%


Bhutan 85% 97% 64% 1%


Burkina Faso 0% 43% 35% 50%


Burundi 0% 96% 4% 80%


Cambodia 37% 81% 92% 50%


Central African Republic 4% 78% 83% 86%


Chad 0% 26% 0% 6%


Comoros 100% 34% 3% 13%


Congo, Democratic Republic 0% 31% 74% 25%


Djibouti 25% 78% 3% 47%


Equatorial Guinea 0% 7% 13% 0%


Eritrea 0% 49% 45% 56%


Ethiopia 2% 66% 18% 86%


Gambia 0% 21% 76% 11%


Guinea 4% 6% 5% 4%


Guinea-Bissau 1% 45% 6% 4%


Haiti 90% 52% 54% 36%


Kiribati 0% 18% 3% 94%


Laos 19% 79% 68% 38%


Lesotho 98% 99% 95% 75%


Liberia 1% 17% 99% 68%


Madagascar 10% 71% 26% 13%


Malawi 56% 11% 12% 87%


Mali 0% 61% 31% 90%


Mauritania 0% 5% 0% 92%


Mozambique 10% 69% 27% 29%


Myanmar 2% 78% 33% 37%


Nepal 5% 84% 79% 26%


Niger 0% 3% 7% 7%


Rwanda 0% 49% 12% 20%


Sao Tome and Principe 43% 23% 68% 54%


Senegal 5% 22% 10% 15%


Sierra Leone 0% 53% 37% 28%


Solomon Islands 0% 53% 4% 89%


Somalia 1% 95% 17% 19%


South Sudan 0% 81% 17% 0%


Sudan 1% 61% 0% 14%


Tanzania 6% 30% 58% 31%


Togo 5% 36% 6% 28%


Tuvalu 21% 85% 55% 73%


Uganda 5% 62% 7% 59%


Vanuatu 11% 80% 24% 87%


Yemen 1% 7% 0% 1%


Zambia 3% 13% 97% 8%






G20 Policies and Export Performance of Least Developed Countries 11




As it measures NTMs affecting existing trade flows, Table 2 does not include products for which NTMs


are prohibitive for LDC exporters (i.e., for which no trade exists). All considered, Table 2 shows that a


substantial share of LDC exports complies with at least one form of NTMs when entering G20 markets.


This could be interpreted as an indication that LDC exports are generally able to comply with the


requirements related to NTMs. However, the relevant issue is whether the presence of NTMs reduces


trade for LDCs. Comparing the percentage of LDC exports subject to NTMs in G20 markets to that of


non-LDCs (Figure 10a) reveals, although there are some exceptions, that the share of LDC exports


subject to NTMs is lower than that of non-LDCs in most product groups. One reason for this pattern


could be that LDC exporters are less able to comply with NTMs, and therefore tend to export less


products affected by NTMs than non-LDC exporters. The overall impact of NTMs on trade costs


suggests that there is a distortionary trade effect of NTMs against LDC exporters. Indeed, a feature of


many forms of NTMs is that they add administrative burden and affect overall costs for exporters.


These costs are thought to be higher for LDC exporters (UNCTAD, 2012). To explore this possibility we


use cost estimates of ad valorem equivalents of NTMs of Bown, Kee and Nicita (2016). According to


these estimates the costs associated with compliance with NTMs appear to be in general higher for


LDCs (Figure 10b).




Figure 10: Incidence and costs associated with NTMs in G20 markets, LDCs vs non-LDCs




All considered, these patterns suggest that LDCs products may become less competitive in G20


markets when NTMs are present. We will more formally elaborate on this in the next section.




0


20


40


60


80


100


P
e


r
ce


n
t


Exports facing NTMs


non-LDCs


LDCs


0


2


4


6


8


10


12


14


P
e


r
ce


n
t


Ad-Valorem Equivalents of NTMs


non-LDCs


LDCs





12 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




4. ASSESSING THE IMPORTANCE OF G20 POLICIES FOR


LDC TRADE


This section analyses the relationship between LDC exports and G20 trade policy. To capture the effect


of G20 trade policies as opposed to other trade-related costs we use a traditional cross-section gravity


model that includes time invariant trade impediments augmented with a set of trade policy variables. In


particular we examine the effect of tariffs and NTMs that G20 countries apply on their imports. The


empirics are constrained by the paucity of NTMs data and build on the methods of Murina and Nicita


(2016). In summary, the quantitative analysis investigates whether a less favourable trade policy stance


(lower preferential margins, and presence of NTMs) results in a larger reduction of exports for LDCs


than for other countries.


The data utilized in the analysis originates from various sources. UNCTADStat database provides


macroeconomic variables. Gravity type variables (distance, landlockedness, and common language)


are from the Trade Production and Protection database (Nicita and Olarreaga, 2006). Trade statistics


for the G20 countries originate from the UN COMTRADE database. Tariff data are from the UNCTAD


TRAINS database and include the ad valorem equivalent of specific duties as calculated by UNCTAD.


Data on NTMs is from the UNCTAD TRAINS NTM database.7 Trade agreement data originates from the


NSF-Kellogg Institute Database on Economic Integration Agreements, as well as the preferential trade


agreement database maintained at the WTO. The data follows the HS (Harmonized System)


nomenclature at the 6 digit level and consists of about 5000 products, 15 G20 importers, and about


150 exporting countries including 38 LDCs. 8 Data for the European Union member countries is


aggregated to form a single entity. Products groups at the HS4 level that are not exported by any of the


LDCs are excluded from the estimating sample.




4.1 ECONOMETRIC ESTIMATION


To form predictions about whether G20 policies affect LDC exports, we apply a cross-section gravity


model framework. The identification strategy is as follows: If G20 trade policy measures are effectively


diverting trade to the disadvantage of LDCs, such measures should translate into a relatively lower level


of trade for LDCs in products where preferential margins are lower, or in products where NTMs are


present. Given the cross-sectional nature of the data, the identification strategy relies on cross product


(HS 6-digits) variation within product group (HS4-digits). To capture G20 trade policy stance we use the


ad valorem tariffs and the presence of NTMs at product level. To investigate whether these policy


measures differentially affect LDCs trade we rely on a measure of preferential margin for tariffs and on


an interaction term for NTMs. In more formal terms the estimating equation is:


,, = ( + ,
+ + , + ,,+ ,, + , +


+ !, ∗ # + $ + %&) + (,,


where Tr denotes imports of each G20 country (denoted as g) from country k, and i denotes the


product (at the HS 6 digit).
is a vector of gravity type variables (distance, landlocked status, common


language, population, and GDP). (product market size) is the value of world trade for the product



7 We use the UNCTAD TRAINS non-tariff measures database, which follows an updated classification. To capture the


distortionary effects of NTMs we use only measures that are actually enforced and that most likely impose asymmetric
costs. In particular, we include SPS and TBT measures, but only those which require conformity assessment procedures.
We also include pre-shipment inspection measures, finance measures and measures affecting competition. We do not
include measures that are applied indiscriminately to all products such as custom surcharges.


8 Due to NTMs data unavailability for Russia, South Korea, South Africa and Turkey, these countries are not part of the
analysis. Due to macroeconomic data limitations 10 of the 48 LDCs are not included in the econometric estimation.





G20 Policies and Export Performance of Least Developed Countries 13




purged by the corresponding bilateral trade This controls for differences in market size within product


groups as well as the concern that NTMs may be imposed on products traded the most. DA is a


dummy controlling for the presence of a deep trade agreement, LDC is a dummy for least developed


countries, t is the effectively applied tariff, pm is the preferential margin enjoyed by LDCs, NTM is the
presence of NTMs. $denotes importer fixed effects and %& denotes 4-digit product group fixed
effects and (,, is an error term. In this setup, the coefficients of interest are which captures the
effect of the preferential margins, and which captures the specific effects of NTMs on LDC. A
positive sign on indicates that LDC exports are higher in products where preferential margins are
higher and a negative sign on implies that the presence of NTMs reduces LDC exports. The
estimating model relies on Poisson pseudo maximum likelihood (PPML) which is robust to the presence


of zero trade flows (Santos Silva and Tenreyro, 2006). Given the cross-sectional nature of the dataset,


multilateral resistance is proxied by adding a multilateral resistance variable as in Baier and Bergstrand,


2009. With regard to the variable of interest the estimation is in log-linear form.




Table 3: Econometric Results


(1) (2) (3) (4) (5) (6)




Agreement 0.273*** 0.230*** 0.230*** 0.230*** 0.232*** 0.241***


(0.0563) (0.0546) (0.0544) (0.0545) (0.0651) (0.0442)


NTM -0.0807 -0.0700 -0.0620 -0.0369


(0.0876) (0.0865) (0.0809) (0.0460)


NTM * LDC -0.655* -0.653* -0.648***


(0.357) (0.381) (0.245)


Tariff -0.0200*** -0.0201*** -0.0198*** -0.0188** -0.0148***


(0.00684) (0.00697) (0.00683) (0.00803) (0.00280)


Pref. Margin 0.0215*** 0.0205*** 0.0210*** 0.0216***


(0.00298) (0.00285) (0.00328) (0.00130)


LDC -0.0547 -0.0936 -0.155 0.297 0.300 0.306


(0.195) (0.191) (0.190) (0.305) (0.261) (0.225)


log (distance) -0.701*** -0.698*** -0.698*** -0.697*** -0.698*** -0.699***


(0.0412) (0.0413) (0.0413) (0.0412) (0.0608) (0.0307)


log (GDP exporter) 0.757*** 0.763*** 0.763*** 0.763*** 0.764*** 0.763***


(0.0452) (0.0462) (0.0462) (0.0462) (0.0603) (0.0190)


log (Population exp) 0.171*** 0.172*** 0.172*** 0.172*** 0.172** 0.172***


(0.0625) (0.0624) (0.0623) (0.0624) (0.0829) (0.0247)


Landlocked -0.330*** -0.320*** -0.320*** -0.320*** -0.321*** -0.323***


(0.0651) (0.0663) (0.0664) (0.0663) (0.0674) (0.0488)


Log (product market size) 0.825*** 0.826*** 0.826*** 0.826*** 0.931*** 0.950***


(0.0118) (0.0119) (0.0118) (0.0119) (0.00971) (0.0143)


Shared Border 0.0783 0.0620 0.0611 0.0600 0.0616 0.0650


(0.0930) (0.0901) (0.0899) (0.0900) (0.153) (0.0703)


Common Language -0.240*** -0.236*** -0.234*** -0.234*** -0.234* -0.235***


(0.0783) (0.0777) (0.0770) (0.0777) (0.121) (0.0628)


Observations 4,287,378 4,286,378 4,286,378 4,286,378 4,286,378 4,286,378


H4 digits groups 1,061 1,061 1,061 1,061 86 1




Robust standard errors in parentheses: *** p<0.01, ** p<0.05, * p<0.1.


Note: Dependent variable: value of imports. Estimation: Poisson pseudo-maximum likelihood. All specifications


include importer fixed effects and multilateral resistance terms. Specifications (1) to (4) include product group fixed


effects.





14 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




Table 3 presents the PPML estimates for several specifications. Specification (1) consists of a


traditional cross-section gravity model. Specification (2) adds the tariff and the NTMs, specification (3)


adds the tariff and preferential margins and controls for LDCs. Specification (4) further adds the NTMs


term and its interaction with the LDCs dummy. Specification (5) and (6) provide robustness checks to


the choice of product groups fixed effects: (5) includes product group fixed effects at the HS 2-digit


level and (6) does not include product group fixed effects.


Most of the gravity variables are significant and have the expected sign. In particular, geographical


distance and being landlocked reduce the value of trade while exporter GDP and population increase it.


In contrast, the coefficient on shared borders is not significant and the coefficient on common language


does not have the expected sign. These results are likely to be driven by the limited sample of


importers. In general, LDCs are not found to export significantly less once controlling for their GDP and


population. As expected, product market size is positively correlated with bilateral trade. With regard to


trade policy variables, the results are consistent across all the specifications. In particular, they indicate


that the presence of a trade agreement increases the value of trade by 25 per cent. Tariffs have a


negative effect on trade, while preferential margins increase trade. A 1 percentage point reduction in


tariffs and a 1 percentage point increase in the preferential margin both increase trade by around 2 per


cent. The coefficient on the presence of NTMs is negative but insignificant. In contrast, the interaction


term between NTMs and the LDC dummy takes a negative coefficient, which is significant at the 10 per


cent level. This implies that NTMs have a trade impact disfavouring imports originating from LDCs. LDC


exports are on average about 90 per cent larger in the absence of NTMs. This result is consistent with


the hypothesis that the cost of complying with NTMs makes LDC exports less competitive. These


results remain consistent across different choices of product groups, using HS 2-digit product group


fixed effects as well as considering all HS 6-digit products within a single group, i.e. without fixed


effects. As a caveat, it should be borne in mind that these results originate from regressions based on


cross sectional data. Therefore it does not allow unambiguous conclusions regarding the direction of


causation, as endogeneity cannot be completely controlled for. However, the results clearly indicate


that LDC exports tend to be relatively smaller when preferential margins are lower or when NTMs are


present.




4.2 ECONOMIC ASSESSMENT


This section provides the economic assessment of the econometric estimation. We use the coefficients


from the regression to estimate the magnitude of the trade effects of tariffs and the distortionary trade


effect of NTMs. This computation serves to quantify the trade gains that LDCs would experience if the


G20 were to provide complete tariff-free market access for LDCs and if the distortionary trade effects


of NTMs were eliminated. With regard to tariffs, the results include both the effects originating from the


elimination of tariffs applied directly to LDCs and from the resulting increase in the preferential margin.


With regard to NTMs, the results quantify the export gains obtained if the distortionary effects of such


measures were removed. A limitation of the methodology used in this study is that the effects are


calculated only on the intensive margins of trade (the increase of trade in products previously exported


to the same destinations), and do not include extensive margins of trade (trade in new products or to


new destinations). Therefore these numbers are to be interpreted as conservative, as they may very


well underestimate the true effects. The effects of G20 trade policy on the extensive margin of LDC


exports, while beyond the scope of this paper, may well be significant, which is why this question


merits further research. At the aggregate level, allowing for tariff-free market access for LDCs is


quantified to increase LDC exports to G20 by almost 10 billion US$, equivalent to an increase in LDCs


total export of almost 5 per cent. Eliminating the distortionary trade effects of NTMs would increase


LDC exports to G20 countries by about 23 billion US$, equivalent to about a 10 per cent increase.


Taken together fully liberalizing market access for LDCs and eliminating the distortionary trade effect of


NTMs on LDCs would increase their exports by about 15 per cent.





G20 Policies and Export Performance of Least Developed Countries 15




Although informative, the aggregate results mask the heterogeneity of effects across product


categories, LDCs and G20 countries. To inform about these differences we first present the effects by


product categories (Figure 11). Most of the effects of tariff liberalization and from addressing


distortionary trade effects of NTMs are concentrated in the textile and apparel sectors, as well as in


some of the agricultural categories, in particular vegetable products. Tariff-free market access in G20


markets would increase LDC textile and apparel exports by about 4 billion US$. Addressing the


distortionary effect of NTMs on LDC trade in these two sectors would add about 11 more billion US$ to


LDC exports. Substantial effects are also found for agricultural products, especially vegetable products.


In this sector the benefits of addressing the distortionary effects of NTMs for LDCs are quantified at


about 5 billion US$. The effect of tariff liberalization would be substantially lower in these products. For


the remaining product groups the absolute effects both related to tariffs and to NTMs are lower due to


the already very low tariffs and a more limited incidence of NTMs.




Figure 11: Impact of duty free access and addressing distortionary effect of NTMs on LDC


exports to G20 countries, by product




The effects are also found to be very different across LDCs. In general terms, LDCs whose exports are


tilted towards natural resources will have little benefits from improved market access in G20 countries.


The reason is that market access is generally free for products of extractive industries, and that the


impact of NTMs is more muted as the export volume of such industries depends primarily on natural


endowments and productive capacity. Among the LDCs that would benefit less from improved market


access in G20 countries are those which export mainly oil (e.g. Angola, Yemen, Chad, Equatorial


Guinea) or other extractive products (Zambia, Niger and Congo D.R). On the other hand, LDCs whose


exports are more diversified into agriculture and manufacturing would benefit the most as these sectors


face relatively higher tariffs and NTMs are more prevalent. Among the largest beneficiaries would be


Asian LDCs such as Cambodia and Bangladesh, as well as African LDCs which are not highly


dependent on the exports of natural resources (e.g. Gambia, Lesotho, and Central African Republic).


For these countries tariff-free market access and addressing distortionary trade effects related to NTMs


could increase exports by 50 per cent or more (Figure 12).




0
1
2
3
4
5
6
7
8
9


10


B
il


li
o


n
U


S
$


NTM


Tariff





16 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




Figure 12: Impact of duty free access and addressing distortionary effect of NTMs on LDC


exports to G20 countries, by LDCs




Note: For the LDCs denoted with * the effects are resulting from out of sample predictions.


Finally, providing LDCs with tariffs-free market access would have different effects across G20


countries depending on the existing tariffs concessions. Similarly, the impact of eliminating the


distortionary trade effects of NTMs would differ across G20 depending on the incidence of their


regulatory framework (Figure 13). In addition, differences among G20 would originate also from


differences in the composition of trade. With regard to G20 markets, the largest effect for LDCs would


be obtained from the increase in exports to the European Union driven by addressing distortionary bias


of NTMs. This would increase LDCs total exports by more than 6 per cent. As the European Union


already sets most tariffs at zero for LDCs, the impact of any further tariff reduction would only be


marginal. With regard to the United States, the results reaffirm the importance of addressing the


distortionary effects of NTMs. Its elimination would increase LDCs total exports by about 2 per cent.


However, the results also point out that for LDCs it remains important to enlarge the United States'


preferential schemes. In numbers, allowing LDC exports to enter the United States' market duty free


would result in an increase in their exports to the world of about 1.5 per cent. Effects of similar


magnitude from enhancing the preferentical schemes for LDCs and from addressing the distortionary


trade effects of NTMs are found for the remaining G20 countries collectively. Finally, lower results are


found in relation to improving LDCs access to the Chinese market. Hovewer, these relatively smaller


results are driven by the fact that existing LDC exports to China are highly concentrated in natural


resources.




0%


10%


20%


30%


40%


50%


60%


S
S


D
*


A
G


O


Y
E


M


T
C


D


N
E


R


G
N


Q
*


Z
M


B


G
IN


Z
A


R
*


R
W


A


M
M


R


B
T


N


M
R


T


T
G


O


S
LE


S
D


N


V
U


T


S
E


N


S
T


P
*


S
O


M


L
A


O
*


K
IR


*


LB
R


D
JI


U
G


A


B
E


N


G
M


B


B
D


I


T
Z


A


C
O


M
*


S
LB


B
F


A


M
O


Z


T
U


V
*


M
W


I


H
T


I


E
T


H


M
D


G


E
R


I


B
G


D


M
LI


A
F


G


N
P


L


G
N


B
*


C
A


F


L
S


O


K
H


M


P
e


r
c


e
n


t
o


f
e


x
p


o
rt


s


Tariffs NTM





G20 Policies and Export Performance of Least Developed Countries 17




Figure 13: Impact of duty free access and addressing the distortionary effect of NTMs on LDCs


total exports, by G20 country




All considered, the results indicate that for LDCs, NTMs are the most important factor in limiting market


access in G20 countries. Still, an important result of this paper is that tariffs remain relevant in limiting


market access for LDCs, at least in some specific cases as that of apparel exports from Asian LDCs to


the United States, and more in general for agricultural exports. In terms of destinations, tariffs remain


relevant for accessing the United States' market as well as the markets of many other G20 countries.






0%


1%


2%


3%


4%


5%


6%


7%


China European Union United States Other G20


NTM


Tariffs





18 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




5. CONCLUSIONS


This study has provided an overview of G20 trade policies and an assessment of their impact on LDC


export performance. The general findings of this study indicate that tariff preferences should be seen as


part of the approach to help improve market access conditions for LDCs. However, tariff preferences


alone are not sufficient, as they would produce meaningful effects only for a limited number of LDCs. It


is necessary to facilitate LDC compliance with G20 regulatory frameworks and eliminate the negative


trade effect of NTMs on LDCs to improve market access and increase exports from LDCs.


In aggregate terms, the impact of providing LDCs with truly tariff-free market access to the G20 is


quantified in an increase of exports of about 10 billion US$, equivalent to about a 5 per cent increase of


LDC total exports. Addressing the distortionary trade effects of NTMs would increase LDC exports to


G20 countries by about 23 billion US$, equivalent to more than 10 per cent increase of LDC total


exports. Taken together, if G20 countries were to fully liberalize market access for LDCs and if the


distortionary trade effect of G20 NTMs on LDCs were eliminated, LDC total exports would increase by


almost 15 per cent.


An issue of fundamental importance is whether the policy options identified in this paper are feasible to


implement. Providing truly duty free access for LDCs is definitively easier to implement than reducing


the distortionary trade effects of NTMs on LDCs. Enlarging preferential schemes to cover all LDC


exports is rather straightforward with the only difficulties originating from limiting possible trans-


shipments. In practice, there is ample room for enlarging and strengthening G20 preferential schemes


to LDCs. In particular, G20 countries should review their eligibility rules, product coverage and


exemptions, rules of origins, and administrative costs, all of which often limit the effectiveness of their


preferential schemes towards LDCs.


On the other hand, addressing the distortionary bias of NTMs on trade from LDCs requires a much


more complex approach. Many NTMs serve public policy objectives and are instruments of domestic


economic policy. Their effect on trade, although substantial, is indirect and therefore, these measures


cannot be eliminated without disrupting the very purpose they serve. Reducing the negative trade


effects of NTMs for LDCs has to originate not from the removal of NTMs but from helping LDCs to


comply with them at a cost-efficient basis. In this regard, there are two policy recommendations. First,


G20 policies should ensure that their regulatory framework does not unnecessarily create


discrimination against LDC exporters. Second, the G20 should continue to assess and monitor the


impact of new and existing NTMs on their trade, eliminate unnecessary measures, and provide


exporters from LDCs with the necessary information and support to ensure that the LDCs are not


negatively affected. In this regard, the G20 countries should provide LDCs with assistance specifically


targeted to overcome their relatively higher cost of compliance with NTMs (Athukorala and Jayasuriya,


2003). Further progress in Aid for Trade initiatives and increases in technical assistance programmes


both on bilateral and multilateral levels would help to minimize LDCs' costs of compliance with NTMs


and therefore facilitate the integration of LDCs in the global economy (Hoekman, 2002).








G20 Policies and Export Performance of Least Developed Countries 19




REFERENCES


Athukorala, P-C. and Jayasuriya, S. (2003). Food Safety Issues, Trade and WTO Rules: A Developing


Country Perspective, The World Economy, Wiley Blackwell, vol. 26(9), 1395-1416.




Baier, S. and Bergstrand, J. (2009). Bonus vetus OLS: A Simple Method for approximating International


Trade-cost Effects using the Gravity Equation, Journal of International Economics, Elsevier,


vol. 77(1), 77-85 .




Bown, C., Kee, H. L. and Nicita, A. (2016). Ad Valorem Equivalents of NTM. Mimeo.




Disdier, A-C, Fontagne, L. and Mimouni, M. (2008). The Impact of Regulations on Agricultural Trade:


Evidence from the SPS and TBT Agreements, American Journal of Agricultural Economics


90(2), 336-350.




Essaji, A. (2008). Technical Regulations and Specialization in International Trade, Journal of


International Economics 76, pp. 166-176.



Evenett, S. and Fritz, J. (2015). Throwing Sand in the Wheels: How Trade Distortions Slowed LDC


Export-Led Growth. CEPR Press.

Fugazza, M. and Nicita, A. (2013). The direct and relative effects of preferential market access. Journal


of International Economics 89, 357-368.

Henson, S. and Loader, R., (2001) Barriers to Agricultural Exports from Developing Countries: The Role


of Sanitary and Phytosanitary Requirements, World Development, 29(1), 85-102.


Henson, S.J. and Jaffee, S. (2008). Understanding Developing Country Strategic Responses to the


Enhancement of Food Safety Standards, The World Economy, 31(1), 1-15.



Hoekman, B. (2002). Strengthening the Global Trading Architecture for Development: the Post Doha


Agenda, World Trade Review, 1, 23-45.




Laird, S (2012). A Review of Trade Preference Schemes for the World's Poorest Countries. Issue paper


25. International Center for Trade and Sustainable Development.




Maskus, K. E., Otsuki, T and Wilson, J. S. (2004). The cost of compliance with product standards for


firms in developing countries: an econometric study. Policy Research Working Paper Series


3590, The World Bank.




Murina, M. and Nicita, A. (2016). Trading with Conditions: The Effect of Sanitary and Phytosanitary


Measures on the Agricultural Exports from Low-income Countries, The World Economy,


forthcoming.




Nicita, A. and Olarreaga, M. (2006). Trade, Production and Protection 1976-2004. World Bank


Economic Review 21(1).




Nicita, A. and Rollo, V. (2015). Market Access Conditions and Sub-Saharan Africa's Export


Diversification, World Development, 68, 254-263.




Santos Silva, J. M. C. and Tenreyro, S. (2006). The Log of Gravity, The Review of Economics and


Statistics, MIT Press, vol. 88(4), 641-658.






20 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




United Nations Conference on Trade and Development (UNCTAD), (2012). Non-Tariff Measures to


Trade: Economic and Policy Issues for Developing Countries, Developing Countries in


International Trade Studies. UNCTAD/DITC/TAB/2012/1.




World Bank (2015): Low-income developing countries and G20 trade and investment policy. Report


number 99933, The World Bank.






G20 Policies and Export Performance of Least Developed Countries 21






UNCTAD Study Series


POLICY ISSUES IN INTERNATIONAL TRADE
AND COMMODITIES














No. 30 Sam Laird, David Vanzetti and Santiago Fernández de Córdoba, Smoke and mirrors:
Making sense of the WTO industrial tariff negotiations, 2006, Sales No. E.05.II.D.16.




No. 31 David Vanzetti, Santiago Fernandez de Córdoba and Veronica Chau, Banana split: How
EU policies divide global producers, 2005, 27 p. Sales No. E.05.II.D.17.




No. 32 Ralf Peters, Roadblock to reform: The persistence of agricultural export subsidies,
2006, 43 p. Sales No. E.05.II.D.18.




No. 33 Marco Fugazza and David Vanzetti, A South–South survival strategy: The potential
for trade among developing countries, 2006, 25 p.




No. 34 Andrew Cornford, The global implementation of Basel II: Prospects and outstanding
problems, 2006, 30 p.




No. 35 Lakshmi Puri, IBSA: An emerging trinity in the new geography of international
trade, 2007, 50 p.




No. 36 Craig VanGrasstek, The challenges of trade policymaking: Analysis, communication
and representation, 2008, 45 p.




No. 37 Sudip Ranjan Basu, A new way to link development to institutions, policies and
geography, 2008, 50 p.




No. 38 Marco Fugazza and Jean-Christophe Maur, Non-tariff barriers in computable general
equilibrium modelling, 2008, 25 p.




No. 39 Alberto Portugal-Perez, The costs of rules of origin in apparel: African preferential
exports to the United States and the European Union, 2008, 35 p.




No. 40 Bailey Klinger, Is South–South trade a testing ground for structural
transformation?, 2009, 30 p.




No. 41 Sudip Ranjan Basu, Victor Ognivtsev and Miho Shirotori, Building trade-relating
institutions and WTO accession, 2009, 50 p.




No. 42 Sudip Ranjan Basu and Monica Das, Institution and development revisited: A
nonparametric approach, 2010, 26 p.






22 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




No. 43 Marco Fugazza and Norbert Fiess, Trade liberalization and informality: New stylized
facts, 2010, 45 p.




No. 44 Miho Shirotori, Bolormaa Tumurchudur and Olivier Cadot, Revealed factor intensity
indices at the product level, 2010, 55 p.




No. 45 Marco Fugazza and Patrick Conway, The impact of removal of ATC Quotas on
international trade in textiles and apparel, 2010, 50 p.




No. 46 Marco Fugazza and Ana Cristina Molina, On the determinants of exports survival,
2011, 40 p.




No. 47 Alessandro Nicita, Measuring the relative strength of preferential market access,
2011, 30 p.




No. 48 Sudip Ranjan Basu and Monica Das, Export structure and economic performance in
developing countries: Evidence from nonparametric methodology, 2011, 58 p.




No. 49 Alessandro Nicita and Bolormaa Tumurchudur-Klok, New and traditional trade flows
and the economic crisis, 2011, 22 p.




No. 50 Marco Fugazza and Alessandro Nicita, On the importance of market access for trade,
2011, 35 p.




No. 51 Marco Fugazza and Frédéric Robert-Nicoud, The ‘Emulator Effect’ of the Uruguay
round on United States regionalism, 2011, 45 p.




No. 52 Sudip Ranjan Basu, Hiroaki Kuwahara and Fabien Dumesnil, Evolution of non-tariff
measures: Emerging cases from selected developing countries, 2012, 38p.




No. 53 Alessandro Nicita and Julien Gourdon, A preliminary analysis on newly collected data
on non-tariff measures, 2013, 31 p.




No. 54 Alessandro Nicita, Miho Shirotori and Bolormaa Tumurchudur Klok, Survival analysis
of the exports of least developed countries: The role of comparative advantage, 2013,
25 p.




No. 55 Alessandro Nicita, Victor Ognivtsev and Miho Shirotori, Global supply chains: Trade
and Economic policies for developing countries, 2013, 33 p.




No. 56 Alessandro Nicita, Exchange rates, international trade and trade policies, 2013, 29 p.


No. 57 Marco Fugazza, The economics behind non-tariff measures: Theoretical insights and
empirical evidence, 2013, 33 p.




No. 58 Marco Fugazza and Alain McLaren, Market access, export performance and survival:
Evidence from Peruvian firms, 2013, 39 p.




No. 59 Patrick Conway, Marco Fugazza and M. Kerem Yuksel, Turkish enterprise-level
response to foreign trade liberalization: The removal of agreements on textiles and
clothing quotas, 2013, 54 p.




No. 60 Alessandro Nicita and Valentina Rollo, Tariff preferences as a determinant for
exports from Sub-Saharan Africa, 2013, 30 p.






G20 Policies and Export Performance of Least Developed Countries 23




No. 61 Marco Fugazza, Jan Hoffmann and Rado Razafinombana, Building a dataset for
bilateral maritime connectivity, 2013, 31 p.




No. 62 Alessandro Nicita, Marcelo Olarreaga and Peri Silva, Cooperation in the tariff waters
of the World Trade Organization, 2014, 39 p.




No. 63 Marco Fugazza and Claudia Trentini, Empirical insights on market and foreign direct
investment, 2014, 33 p.




No. 64 Marco Fugazza, Céline Carrère, Marcelo Olarreaga and Fréderic Robert-Nicoud, Trade
in unemployment, 2014, 36 p.




No. 65 Céline Carrère and Christopher Grigoriou, Can mirror data help to capture informal
international trade?, 2014, 42 p.




No. 66 Denise Penello Rial, Study of average effects of non-tariff measures on trade imports,
2014, 26 p.




No. 67 Cristian Ugarte, Weak Links and diversification, 2014, 28 p.


No. 68 Marina Murina and Alessandro Nicita, Trading with conditions: The effect of sanitary
and phytosanitary measures on lower income countries' agricultural exports, 2014,
20 p.




No. 69 Olivier Cadot, Alan Asprilla, Julien Gourdon, Christian Knebel and Ralf Peters, Deep
regional integration and non-tariff measures: A methodology for data analysis,
2015, 36 p.




No. 70 Marco Fugazza, Maritime connectivity and trade, 2015, 30 p.


No. 71 David Vanzetti, Ralf Peters and Christian Knebel, Sand in the wheels: Non-tariff
measures and regional integration in SADC, 2016, 31 p.




No. 72 Marco Fugazza and Jan Hoffmann, Bilateral liner shipping connectivity since 2006,
2016, 30 p.




No. 73 Alain McLaren, Policy space in agricultural markets, 2016, 24 p.


No. 74 Irene Musselli, Farm support and trade rules: Towards a new paradigm under 2030
agenda, 2016, 29 p.




No. 75 Alessandro Nicita and Julia Seiermann, G20 policies and export performance of least
developed countries, 2016, 29 p.








Copies of the UNCTAD study series Policy Issues in International Trade and Commodities may be
obtained from the Publications Assistant, Trade Analysis Branch, Division on International Trade
in Goods and Services, and Commodities, United Nations Conference on Trade and
Development, Palais des Nations, CH-1211 Geneva 10, Switzerland (Tel: +41 22 917 4644).
These studies are available at http://unctad.org/tab.











Printed at United Nations, Geneva
1625923 (E) – December 2016 – 241


UNCTAD/ITCD/TAB/77


United Nations publication
ISSN 1607-8291




Login