Dutch exporters facing more trade regulations

© Hollandse Hoogte / Flip Franssen
Since the World Trade Organization was established in 1995, average import tariff rates have fallen worldwide. On the other hand, international exporters have had to comply with more and more rules and regulations, for example to ensure the quality and safety of products or to protect nature. These may hamper the exportation of merchandise. Currently, 95 percent of all exports from the Netherlands must comply with certain technical requirements. Statistics Netherlands (CBS) reports this in the latest edition of its Internationalisation Monitor, which maps connections between international trade, trade policy measures and product quality.

To protect domestic firms from foreign competition, governments may use various trade policy instruments. Import tariffs are used to impose a tax on imported products. For years, average import tariffs have fallen steadily around the world. They have now stabilised, apart from those in the escalating trade conflict between China and the United States. The cost of exporting has fallen as a result, benefiting international trade.

Import tariffs in world trade, weighted average, 1988-2017 (%)
 Weighted average rate
19884.79
19896.23
19906.82
19916.14
19927.17
19937.42
19948.57
19956.44
19966.15
19975.42
19985.22
19995.21
20004.96
20015.38
20024.56
20034.57
20043.72
20053.5
20063.16
20073.38
20083.31
20093.2
20103.3
20113.53
20122.89
20133.04
20142.87
20153.06
20162.98
20172.59
Source: World Bank.

More regulations imposed on export goods

Another trade policy instrument are the so-called non-tariff measures. Dutch businesses are increasingly confronted with measures imposing requirements on the quality, safety and environmental impact of their products by way of quotas, price controls or product-specific measures. In addition, there are non-product-specific measures, e.g. rules regarding intellectual property or local content requirements. These may potentially have an economic effect on international trade because they lead to changes in quantity or price. The number of regulatory measures has been rising for years. Now, already 37 percent of Dutch exports are subject to sanitary and phytosanitary standards (SPS). These are mainly related to food safety. Technical regulations, primarily aimed at protecting nature and ensuring higher quality in processes and products imported elsewhere, even affect 95 percent of all Dutch exports.

Product-specific non-tariff measures, 2007-2018 (Number of NTMs)
 Sanitary and phytosanitary standardsTechnical trade barriers
20078471020
20088861235
20097371351
201010511266
201110051140
20128581479
20139271536
201411511428
201512641222
201610281443
201710961734
201813162039
Source: WTO I-TIP database

Export rules may improve product quality

Under World Trade Organization regulations, countries are not allowed to protect domestic firms against foreign competition. Nevertheless, countries may apply non-tariff measures to both safeguard the quality and safety of international trade and to guard against foreign competition.
CBS has studied the relationship between these regulatinos and the quality of export products. Based on a descriptive analysis of three different products, CBS has found that more measures result in higher-quality products, with the price per unit serving as a rough indicator of quality. Aside from raising the quality of the export products, these measures may also boost trade. Such product requirements enhance the visibility of product quality, thus increasing consumer confidence. This may boost demand for the quality product.
Wherever rules apply to a certain product in the country of destination, the price per unit will be higher than in the absence of such rules. The more rules apply to a product, the higher the price charged by Dutch exporters.

040203-ENG-NEWCorrelation between unit price and number of NTMs implemented Unit price(ln) *Estimated value based on regression coefficients with average fixed effect Number of NTMs implemented per product and country of destinationCorrelation between unit price and number of NTMs implementedUnit price(ln)*Estimated value based on regression coefficients with average fixed effect Number of NTMs implemented per product and country of destination