# **6. Concluding Remarks**

With the decline in traditional trade barriers initiated by the DR-CAFTA, Non-Tariff Measures (NTMs) are increasingly viewed as a key trade policy issue in Central America. Yet, despite anecdotal evidence that borders remain thick, there is little quantitative understanding of the incidence of NTMs in the region. This paper provides, to the best of our knowledge, the first attempt to look at incidence of technical NTMs (SPS and TBT regulations) and to estimate their impact on border prices in Central America. It also assesses the impact of SPS measures on the border prices of important consumption products in Guatemala and estimates the poverty impact of streamlining key SPS measures affecting them.

We use data collected by the World Bank in Central America in 2012 and carry out three distinct analyses. Firstly, we provide a descriptive analysis of the incidence of technical NTMs in the Central American region. Our results indicate that, of the seven geographic regions of the World Bank, Central America has the lowest prevalence of these regulations, with 33.3% of imports covered by at least one technical NTM. By contrast, over half of all goods imported to Sub-Saharan Africa, Europe and Central Asia and the Middle East and North Africa are governed by at least one technical NTM. However, there is significant variation in the use of NTMs within the Central American region with El Salvador using them most intensively (coverage ratio of 48.2%), but Honduras availing of them quite sparingly (coverage ratio of 16.2%).

We then use econometric techniques to estimate the impact of NTMs on domestic price and find that SPS measures increase prices by an average of 11.6% across the Central American region. However, the advalorem equivalent varies widely across the individual countries, ranging from 6% in Costa Rica to 55% in Guatemala, with NTMs having no significant price impact in either Nicaragua or Honduras. Private sector consultation undertaken in 2012 identified four products that are important for regional trade and for which SPS measures in general, and registration requirements in particular, are especially challenging: beef, bread and pastry, chicken meat, and dairy products. Using our empirical framework, we find that the ad-valorem equivalents of SPS measures for these products are 68.4%, 51.4%, 22.0%, and 5.0%, respectively.

Finally, we explore the poverty impact of streamlining NTMs measures in Guatemala by merging the NTM data with Guatemalan household survey data. The main finding is that rationalizing the use and processes related to compliance with SPS measures would reduce domestic prices. This would make the basic consumption basket more affordable benefitting the poorest sector of the population. Our computations suggest that streamlining the main SPS measures affecting these products by, for example, enforcing harmonization and mutual recognition of sanitary registries, could reduce the urban poverty rate from 5.07% to 4.91%.

We suggest three issues for policy dialogue at the regional level aimed at streamlining trade regulation and improving national and regional competitiveness. Our first suggestion is to better disseminate information on the current laws and regulations about import and export procedures to the wider public, particularly the business community. In this regard, grouping and regularly updating information in a regional portal would alleviate informational asymmetries that increase the cost of doing business in Central America. The second suggestion is considering setting up a regional secretariat by assembling a public-private steering committee that oversees and discusses the regional regulatory framework affecting trade. A comprehensive regulatory impact assessment for existing and proposed NTMs may be initiated 30