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Market Access
• Margin of preferences. Does one or more of the competitors receive a preferential tariff either through a regional, bilateral, or unilateral arrangement from a major importing country? What is the margin of preference? Does this margin received by competing countries outweigh any cost and price advantage that Country A enjoys? If Country A receives preferences itself, are they negated by compliance criteria such as tight ROO? For small LDCs, concessions on market access appear to be more important than for larger exporters that rely on scale and cost advantages to be competitive despite having to face negative preferential margins on tariff. Step 2: Find Out about the Main Nontariff Barriers Faced by Exporters
In addition to tariffs, several trade instruments can potentially be invoked to restrict market access, including quotas, antidumping and countervailing duties, and safeguards. Other provisions can also be applied with restrictive intent, such as technical safety and sanitary requirements, and compliance with intellectual property rights (IPR). Major questions to ask regarding NTBs are as follows: • Technical regulations. To what extent do SPS and TBT measures represent prominent restrictions to exports? Are these measures perceived as justified or used to restrict trade? Is compliance difficult and expensive? Are procedures cumbersome? Is the information publicly available and accessible? Are the problems related to the measure itself or the inspection at the border? Are these measures applied on an MFN basis? Are there any mutual recognition agreements for standards with key partners and at the regional level? • Incidences of trade remedy action. Is a particular export part of an industry that is a frequent target for trade remedy actions? Has there been an antidumping investigation against the country’s export, in the past 18 months?1 By which country in which product and industry? Did the investigation lead to an actual imposition of duty? Has there been a CVD investigation, and
Table 2.1. Market Shares of Major Exporters of HS 6204 (Women’s Suits) in 2008 in Selected Markets
Canada European Union Japan United States Source: ITC 2011. Note: — = not relevant.
World (US$)
Bangladesh
China
Morocco
1,144,146 13,007,403 3,388,246 12,411,131
4.49 4.36 0.06 4.73
58.11 41.80 82.04 38.63
0.48 7.62 0.39 0.32
Romania 0.94 — 0.48 0.25
Turkey
Vietnam
1.75 14.12 0.22 0.49
2.14 2.06 2.85 7.84
Module 2
Germany or the United States) or growth potential (for example, Brazil, China, or India)? Does Country B have high tariffs (or peaks) on major exports from Country A? Does it escalate tariffs to deter import of value-added goods? Are there tariff-rate quotas (TRQs)? As an example, the United States has high MFN applied duties against the import of HS 240120 (tobacco, partly or wholly stemmed/stripped). The average tariff for least developed countries (LDCs) is more than 77 percent. However, an African LDC like Malawi qualifies for a zero tariff, but a non-African developing country can face a specific tariff of US$5,480 per ton, or a tariff equivalent of 158 percent. It would be highly difficult to compete in an identical product when a competitor has a substantial margin of tariff preference, which is the case in many agricultural and labor-intensive manufactured exports. • Penetration of markets. Because the tariff rates faced by a country as well as its competition determine the depth of one’s market access, it is crucial to know about other competing countries that export similar products as Country A. In the example in table 2.1, exports in 2008 of product category HS 6204 (women’s suits, jackets, and so on) to the world’s four major importers are shown. China, Romania, Turkey, and Vietnam are large exporters of the product. In Bangladesh and Morocco, both products were important, accounting for 8.8 and 4.6 percent of their total exports. In the United States, Morocco’s exports are substantially less than that of Bangladesh, despite the fact that Morocco has a free trade agreement with the United States, and qualifies for reduced tariffs. In HS 6204, the MFN tariff that Bangladesh pays is 14 percent. Morocco is eligible for the preferential rate of 2.8 percent. Although its focus on the EU market is understandable given the geographic proximity, the underpenetration of the US market is worth exploring. Why are preferences being underutilized in a lucrative market? Although the rate of utilization can be calculated quantitatively, the reasons will have to be gathered through qualitative assessments and interviews.