time of writing, data on 33 countries was available on WITS<sup>1</sup> (the World Bank’s portal for trade data) with the remaining data still under verification by UNCTAD’s statistical division. This study is the first attempt to use this new database to provide information about the trade incidence of NTMs across countries in the Central American region. We specifically focus on the role of technical NTMs, namely Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT).

This assessment makes three key contributions to the literature on NTMs. Firstly, using this new and comprehensive dataset, we provide a descriptive analysis of the incidence of SPS and TBT measures in five Central American countries and benchmark Central America against other regions in the world. Secondly, we use econometric techniques to estimate the effect of NTMs on consumer prices, and determine how this effect varies across regions and type of NTMs. Thirdly, we explore the poverty impact of streamlining NTMs in Guatemala, one of the poorest countries in the region.

Results indicate that the Central American region has the lowest prevalence of technical NTMs in the world. However, there is significant heterogeneity in the coverage of NTMs across countries. For instance, 16.2% of all imports to Honduras are covered by at least one NTM, compared to 48.2% of goods entering El Salvador. This variation is reflected in the implementation of TBTs; only 7.9% of imports to Honduras are subject to a TBT, compared to 42.3% of imports to El Salvador. By contrast, countries are quite consistent in their application of SPS measures with this NTM imposed on between 16.1% and 21.6% of trade in the region. Our analysis also indicates that SPS measures inhibit intra-regional integration. In particular, registration requirements for SPS reasons (the so-called sanitary registries) are identified as a possible obstacle to regional integration. When compared with other countries for which data are available, four of the five Central American countries are identified as heavy users of sanitary registries.

We find that SPS measures have a significant impact on domestic prices in Central America. Across all products in the five countries, SPS measures have an average ad valorem equivalent of 11.6%. We investigate this price-raising effect in more detail for four key products in Guatemala: beef, bread and pastry, chicken meat, and dairy products. According to our estimation, the average import prices of these products rise by an amount equivalent to an ad-valorem tariff of 68.4%, 51.4%, 22.0%, and 5.0%, respectively.

Finally, we estimate the impact of streamlining SPS measures in Guatemala, and find that rationalizing the use and processes related to SPS measures affecting beef, bread and pastries, chicken meat, and dairy products would reduce domestic prices. This would have the effect of making the basic consumption basket more affordable, thereby benefitting the poorest segment of the population. Our computations suggest that streamlining the most significant SPS measures affecting these products could reduce the urban poverty rate from 5.07% to 4.91%.

We identify selected issues for policy dialogue at the regional level aimed at streamlining the NTM agenda. The manner in which countries’ sanitary registries work is a hindrance to deeper regional integration. A key issue is that while there is mutual recognition of registries across countries, all exporters must produce paperwork for each individual country they wish to enter. A solution that could make great strides in this area is the formation of a regional, electronic database that centralizes

> 1 <u>http://wits.worldbank.org/wits/</u>

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