Analysis of Non-tariff Measures

Result of Service
The research results will contribute to improve the precision in the elaboration of commercial policies for the import of agricultural inputs for advanced links in the production chains.

Work Location
Brasília

Expected duration
180 Days

**Responsibilities**:
Brazil, due to its geographic, historical, and political-economic conditions, has positioned itself in the international market as a competitive supplier of agricultural products. This result is consistent with the theoretical expectations of traditional theories of international trade. As the country has an abundance of natural resources, it is expected that products that are intensive in these factors will endow the country with comparative advantages and position it favorably in relation to other countries in the commercialization of these products. According to these theories, there would be no economic reasons to support trade policies deliberately restricting the entry of these products into the country.

Given the seasonal nature of production, impediments to international agricultural trade can compromise downstream links in production chains that use agricultural products as inputs. International trade would be, in periods of reduced supply, a complementary supplier to the industry. This study aims to identify plant and animal products that show signs of commercial protection in Brazil, combined with economic relevance in the current context of national challenges. As a next step, the study selects a production chain of which the supposedly protected product is part and evaluates the effects of NTM removal on the different links in this production chain.

Thus, this study seeks to contribute to the evaluation of less stringent trade policies for the import of agricultural products. This lesser rigor is understood as a non-tariff barrier removal, which in turn is scaled by an equivalent tariff. The analysis focuses on the upstream and downstream links of a selected production chain. The effects of removal tend to be ambiguous between the links and their analysis is important to determine winners and losers and, thus, establish assertive public policies.

Trade protection can be operationalized by tariff and non-tariff barriers. While tariffs constitute an ad valorem charge on the product, non-tariff measures (NTMs) are all types of requirements required for the commercialization of exported products in a specific domestic market that do not become a tariff. NTMs are intended to protect the health of plants, animals, the environment, and people. These measures gained prominence in international relations as agreements between countries reduced tariffs between the decades of the 40s and 70s of the last century. The increase in the establishment of NTMs since then suggests that many of them can be used as a subterfuge to the agreements made and are intended to protect domestic producers from international competition.

Tariffs and non-tariff measures, which become barriers to the entry of agricultural products, in which the country is recognized as competitive, would result in protection of the agricultural link, but a lack of protection for the industrial link that uses these products as main inputs. Oscillations in the cost of production resulting from internal productive instabilities of the agricultural product can increase the final price of the industrial product, causing losses in important markets, which, in a competitive international market, tend to be permanent. This effect returns to the agricultural link, which starts to lose demand derived from industry in the medium and long term.

In the international literature, Brazil appears as one of the most protective countries with the use of NTMs, especially among agribusiness products (Beghin, Disdier and Marette, 2015; Ennew, Greenaway and Reed, 1990; Kee, Nicita and Olarreaga, 2009; Melo and Nicita, 2018; Niu et al., 2018). Case studies point to the ambiguous effects of restrictions on the import of inputs for the development of links in production chains (Calvin and Krissoff, 1998; Ferrantino, 2006; Lusk and Anderson, 2004). Investigating these effects in Brazil helps to assess how compromising the import rigidity imposed by NTMs on the processing and industrialization of food products can be. In addition, evaluating the potential gains/losses with the removal of this rigidity contributes to the formulation of public policies aimed at the most negatively affected links.

Knowing the intensity and structure of this protection helps to assess the escalation of the incidence of NTMs, that is, the propagation in the links downstream of the protected link, and therefore, the cost increase in production processes arising from targeted commercial protection. The relevance of this lies in being able to establish the most important target sectors for political intervention in terms of establishing adequate incentives, whether unprotected or not.

This consultancy has as its