Developing Countries and Barriers to Trade

Prior to the adoption of a rules-oriented system, there were barriers or trade restrictive measures which were identified under the GATT as ‘obstacles to international flows’ of goods and services. Such barriers made it impossible for producers and exporters to make meaningful gains from their economic endeavours, and for consumers to have a reasonable choice of goods and services. Davey et al analysed these obstacles on four levels. Generally, these were:

• 1. Governmental explicit obstacle to imported goods e.g. quantitative restrictions, subsidies, government procurement practices.

• 2. Governmental internal practice or regulations which have protective effects e.g. regulations requiring a higher standard of safety for imports, requirement that importers be licensed. The authors point out here that there is often a valid domestic governmental purpose such as consumer health or protection addressed by the regulation and that the problem is balancing the application of governmental measures for a legitimate purpose against the requirements of the international trading system to minimise obstacles to imports.

• 3. Problems which arise due to the importing structure of the importing country e.g. government ‘industrial policy’, the structure of industry.

• 4. Business practice (non-governmental) e.g. governmentally-induced practices such as directing a private firm to refuse to purchase foreign goods, restrictive business practices of private enterprises such as exclusive dealing arrangements, business practice and structure such as habits and preferences of businesses, cultural barriers including a dislike of certain brand names, or a willingness to pay a premium for certain quality or specialty goods. Here, Davey et al note that these preferences may require marketing expertise on the part of particular companies in order to allow them penetrate the market.

These barriers are related to both developing and developed country alike. Given the efforts of the multilateral trading system in eliminating these restrictions by the provision of a uniform set of rules for the trading environment, why is it still difficult for developing countries to integrate fully into the world trading system?

In his seminal work on the integration of developing countries at the GATT, Hudec was of the view that the main factor limiting further improvements in market access for developing countries ‘is the relative lack of economic power of developing countries’.