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PRONTO Report Summary

Project ID: 613504
Funded under: FP7-SSH
Country: Switzerland

Periodic Report Summary 1 - PRONTO (Productivity, Non-Tariff Measures and Openness)

Project Context and Objectives:
Over the past fifty years, there has been significant progress in lowering tariff barriers to international trade. This has led to a growing awareness of the importance of what are termed the new Non-Tariff Measures (NTMs). The relevance of these new NTMs has grown with the rising importance of global sourcing and multinational enterprises. Today, with the dominance of global value chains and the increased tradability of non-tangible products, we are confronted with new and important questions about the impact of NTMs on competitiveness and productivity.
As a result, these NTMs have attracted growing attention from policy makers. As the level of tariffs has decreased, the relative importance of NTMs has increased. In addition, there is some evidence that NTMs are being used to substitute for the tariffs that have been reduced in past agreements. Finally, while there has been significant progress in quantifying the effects of NTMs, we do not have a complete understanding of how NTMs affect the cost of doing business within global supply chains. In addition, NTMs have also evolved with changes in the regulatory focus of government vis-à-vis foreign firms and the new NTMs are very different from earlier measure, which were instead focused on quotas and direct regulation of cross-border trade flows.

The medium-scale focused research project "Productivity, Non-Tariff Measures and Openness" (PRONTO) promises new and better data, better methodologies, and better understanding of the impact of these NTMs on international investment and trade.
PRONTO addresses each of the following research elements within a set of inter-related activity streams:

1. Collection of quantitative information on the regulatory measures influencing cross border trade and investment;
2. Developing new methodologies for quantifying NTMs and for both quantitative and qualitative analysis of their effects;
3. Mapping data availability, identifying scope for improvement by building on existing sources, and mapping onto other databases such as WIOD and EU-KLEMS.
4. Analysing the impact of NTM reduction on a range of economic and social objectives.

The first set of activities is focused on consolidating existing indicators of NTMs (Work Package 1) and developing new indicators (Work Package 2). This will result in the development of an NTM Indicators Database (NID) by the end of year two of the project. The second stream of activity builds on the new database to develop new analytical methods to better understand the impact of NTMs on important economic and social objectives (Work Packages 3,4), as well as interaction of such objectives with market access conditions. The final set of activities will be a set of reports on analytical methods and assessment of key relationships between NTMs and socio-economic objectives (Work packages 5,6).

A major goal, to be realized by the end of the project, is the public release of a comprehensive database that integrates existing primary source data on NTMs at a detailed level with new measures developed during the project. This database should have the potential to live beyond the 4 year life of the project, meaning it can be regularly updated and expanded to serve the needs of the policy and research community.
Project Results:
In the first reporting period of the project (the first 12 months), the primary objectives have been concentrated under WP1 and WP2. The core activities have focused on identifying and assessing available existing data sources for quantifying NTMs (WP1) and also laying groundwork for extending the scope of available data, in terms of prospects for creating new sources of data (WP2). As part of WP1, the PRONTO team has also been working closely with the international organizations that are the primary source for existing NTM data. These agencies, represented by the Supervisory Board, have been actively working with the PRONTO team, and indeed one benefit of their cooperation through the PRONTO project is a platform for cooperation between the international organizations themselves.

In this first period, a comprehensive methodologies inventory has been completed. This will be used to establish an open source (i.e. publicly accessible and updatable) in the next phase. In addition, primary public sources of NTM data from the relevant UN agencies (UNCTAD, WTO, OECD, World Bank, UNITC) have been identified and collected, and in the next phase these will be processed to form the core of the PRONTO NTM dabatase. Work has also begun on developing new measures, and on methodologies for quantifying the effects of NTMs. These, in the following phases of the project, will then be applied to the PRONTO database itself, and will help to both expand the database (where we can develop new measures) and feed into the socio-economic assessments in WP5 and WP6 at the later stages of the project.
Potential Impact:
The medium-scale focused research project “Productivity, Non-Tariff Measures and Openness” (PRONTO) promises new and better data, better methodologies, and better understanding of the impact of NTMs on international investment and trade. Emphasis is placed on policy relevance and data availability. The project brings together a team of world-class researchers from academia, policy organizations, and the private sector to offer a comprehensive and unified approach to describing and measuring these NTMs and their impact on a variety of social outcomes.

Although the research team is European, the results will have impacts well outside the EU. First, it must be remembered that these NTMs will have impacts on non-EU trading partners, both in terms of restricting their trade directly and by diverting trade towards member states which may find it easier to overcome the NTM barriers. Furthermore, if NTMs influence the productivity of European firms, this will have an impact on EU exports to the US, Japan, and other countries. Thus, understanding the impact of NTMs on the EU has important implications for understanding their impact outside the EU and for the potential for mutually beneficial coordination on NTMs. In addition, by laying out a methodology for the study, quantification, and use of NTMs in research, the project will have a large influence on the study of these issues even when the focus is elsewhere. Thus our analysis will both enrich our understanding of the global issues surrounding NTMs and on the academic study of these policies. Finally, although the research team is European, among the goals of the project is to identify the impacts of NTMs on other countries, most notably the EU’s developing country trading partners.

The first result of the project will be to extend the state of the art of NTM measurement by collecting existing NTM measures, identifying key NTMs not yet measured, and filling those gaps. A key aspect of this is recognition of the ways in which NTMs interact with one another. The second final result will be to use these improved measures to estimate the effects of NTMs on a variety of social and economic outcomes, including their impact on income and inequality in the EU, their role in promoting sustainable growth in developing countries, the effects they have on technological growth, and the frictions they create in the global supply chain. This phase will also include an impact analysis of the likely effects of NTM liberalization. Thus, the project will produce both improved understanding of NTMs and their effects, allow for more meaningful policy recommendations, and provide an innovative data set ideal for continued work on international trade and investment policy.

The PRONTO database should have the potential to live beyond the 4 year life of the project, meaning it can be regularly updated and expanded to serve the needs of the policy and research community. The data and methodology elements of this project should benefit the broader public by improving the ability of our elected representatives to negotiate new, deeper trade and investment agreements by better understanding the role of NTMs in affecting economic integration. Civil society should benefit as well from a better understanding of the impact of NTMs on broad socio-economic objectives. In general, adhering to the belief that democratic societies benefit from more information, as this is an important public policy area, the information generation and dissemination tasks under this project should improve the public policy dialog on NTMs.

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