.INTERNAL AND EXTERNAL CONSTRAINTS “The enemy is anybody who’s going to get you killed,” Joseph Heller had a character say in the novel Cat...
.INTERNAL AND EXTERNAL CONSTRAINTS “The enemy is anybody who’s going to get you killed,” Joseph Heller had a character say in the novel Catch 22, “no matter which side he’s on”. One might adapt that idea to trade policy to state that, as a general principle, the principal objective of a trade ministry should be to reduce or eliminate any barrier to the full participation of the country’s industries in the trading system, no matter what its nature or where it might be found. Some of those barriers may be external constraints such as tariffs and non-tariff measures imposed by partner countries, but many others may take the form of internal constraints. The latter includes capacity limitations that affect the country’s ability to produce and export competitive products (e.g. inadequate infrastructure, deficits in human capital, etc.), as well as policies that might discourage entrepreneurship (e.g. through heavy taxation, regulation, or corruption). No matter where these inhibitions originate, they should receive the attention of the trade ministry and the TPF. Many of the external barriers that developing countries face have been greatly diminished over the past generation, or have even disappeared altogether.
Whether as a result of dependence on primary products, their eligibility for preferential programmes, or their negotiation of regional agreements, many small and poor countries have seen tariffs on their exports whittled down to low or zero levels. This will often mean that their opportunities to export are determined more by capacity constraints at home than by barriers abroad. For many of these countries, the promotion and facilitation of trade are 68 TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES more important than negotiation or litigation. Trade liberalization has now progressed to the point where protected sectors are the exception rather than the rule in most developed countries, and the greatest constraints on the opportunities of most developing countries are internal rather than external. These two points have tremendous implications for the workload of trade ministries, where the domestic tasks are often more important than the international. Put another way, trade is determined more by the efficiency of firms and the environment in which they operate at home than by the trade barriers that governments choose to impose, waive, or remove. The fundamentals for long-term growth are human resources, physical infrastructure, macroeconomic measures and the rule of law. The role of trade policy in economic growth is largely auxiliary and of an enabling nature: extremes of export taxation and import restrictions can surely suffocate nascent economic activity, but an open trade regime will not on its own set an economy on a sustained growth path. Too much focus on “outward orientation” and “openness” can even be counterproductive if it diverts policymakers’ attention away from the fundamentals listed above and treats trade rather than per capita income as a yardstick of success. Rwanda’s Development-Driven Trade Policy Framework (2010) The most important barriers to foreign markets that do remain are primarily in the form of non-tariff measures that are more often adopted for technical than for protectionist purposes, but may nevertheless have a restrictive effect. One frequent example is the imposition of sanitary and phytosanitary measures on products that can, if not handled properly, pose threats to the health of consumers in developed countries. The resulting restrictions on imports of (for example) fruits, vegetables, meat, and fish from developing countries are typically not manifestations of protectionism per se, but are best seen instead as external reflections of internal constraints. If countries do not have in place the needed resources to meet developed countries’ standards, such as safe and reliable sources of clean water and electricity, they may find their products excluded from these markets. These are points that one finds reflected in the TPFs produced to date. The TPF for Zambia, for example, paid just as much attention to the NTBs that the country itself imposed on imports from its regional partners as it did on the NTBs that those partners imposed on Zambian exports. Similarly, the Jamaican TPF noted the problems encountered in the development of new, processed agricultural exports in an environment in which “standards are increasingly stringent and constantly changing,” and in which “compliance has considerable cost implications, particularly for SMEs” (p.80). The TPF for Rwanda likewise noted that the country’s coffee faces no duties in major export markets, but as an LDC the country lacks “capacity to meet standards for its exports” (p.19). These include the European Union’s standards with respect to ochratoxin (a type of fungus) for roasted, ground and soluble coffee; United States standards for pesticides in coffee and tea; and food safety standards in Switzerland. The ability of Rwanda to meet these standards is hampered by the unavailability of the needed infrastructure and personnel, obliging it to use services in other countries in order to test its own products. That problem is being ameliorated by strengthening the capacity of the Rwanda Bureau of Standards, and obtaining accreditation of its laboratories, but it is clearly a great expense for a poor country.
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