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Standards and Agricultural Exports of Developing Countries: Case of South Asia

Sachin Chaturvedi

Session on Standards and Market Access

Cancun Trade and Development Symposium (CTDS)

11th September 2003, Cancun

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Trade and Environment since Doha

* WTO Ministerial Conference at Doha directed that negotiations on issues relating to SPS measures should addressed on priority basis.

* The Committee on Trade and Environment (CTE) was instructed to give particular attention to the effect of environmental measures on market access and trade

* This has become relevant in light of the fact that the past decade has seen a global proliferation of

environment and health related standards along with a rise in the trade in environmentally sensitive goods

* Since the inception of WTO some 3700 notifications have been received and almost 18 per cent of them are

related to environment.

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Trade and Environment: Emerging Issues

* Harmonisation of International Standards

* Environmental Standards - Precautionary/Protectionist

- Food Safety Regulations

- Labelling Requirements

- Quality Standards

* National Standards and Global Standard Setting Process

* Stringent Environmental Regulations force manufacturers of pollution-intensive products overseas. It is feared that differences in environmental regulations across the globe is leading to relocation of industries

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SPS Agreement: Concerns or Protectionism!SPS Agreement: Concerns or Protectionism!

* Sanitary and Phytosanitary (SPS) measures are requirements imposed by governments to ensure the safety of products for human on animal consumption, or to protect the environment (plant life).

* Most governments establish minimum standards that products, plants on animals must meet in order to be allowed to enter their territory.

* In early nineties these differences have become so stringent that they restrict imports to a great extent.

* Accordingly the concept has expanded on lines of ‘Precautionary Measures’ to cover regulations and procedures, including product criteria; process and production methods; testing; inspection; certification and other risk assessment methods.

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SPS Agreement: Concerns or Protectionism!SPS Agreement: Concerns or Protectionism!

* The Agreement also has a provision for recognition. WTO members must accept the SPS measures of other member

countries as equivalent even if they differ from their own.

* WTO encourages bilateral or multilateral agreements on recognition and the equivalence of specified SPS

measures.

* The Committee on Sanitary and Phytosanitary Measures may grant developing countries specified, time-limited exceptions in whole or in part from meeting the

requirements of the agreement. Least developed country members may delay applications of the provisions of the agreement.

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Difference between SPS and TBTDifference between SPS and TBT

SPSSPS TBTTBT

Deviation from MFN Χ

Deviation from International Standards Χ

Negative Trade Effect Χ

Economic Factors considered Χ

Adoption even without scientificevidence Χ

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G77/ Perez-Guerrero Trust Fund (PGTF) G77/ Perez-Guerrero Trust Fund (PGTF)

Research Project Research Project

onon

Impact of Enhancing Environmental Standards on Impact of Enhancing Environmental Standards on International Trade of South Asian CountriesInternational Trade of South Asian Countries

* The project was being conducted through a network of institutions in South Asia led by RIS.

* Bangladesh Institute of Development Studies (BIDS), Dhaka, Bangladesh

* Sustainable Development Policy Institute (SDPI) Islamabad, Pakistan.

* Nepal Forum of Environmental Journalist, Kathmandu, Nepal.

* Institute of Policy Studies, Colombo, Sri Lanka

* Shernbtse College, Kanlung, Bhutan

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What are Environment related Trade Barriers (ETBs)?

* Trade Restriction with Consideration for Protection of

- Plant Health

- Wildlife

- Animal Health

- Human Health

- Human Safety

* Thus, Major issue of concern is that the distinction between environmental, health and quality standards is gradually becoming blurred

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Measurement of ETB: TRAINS, UNCTAD Database

* Finance Measures: advance payment requirements, multiple exchange rates, transfer delays, etc.

* Automatic Licensing Measures: automatic license, prior surveillance

* Quantity Control Measures: export restraint arrangements, enterprise specific restrictions

* Monopolistic Measures: single channel for imports, compulsory national services

* Technical Measures: technical regulations, pre-shipment inspection, special custom formalities, obligation on recycling

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ETB in Agriculture and Marine Products

* MRL Aflatoxin EU, Japan

(Chilli, Peanuts,

other Nuts)

Milk Products

* Mediterranean Grapes China

Fruit Fly

* Fumigation/ Flowers Japan

Other Quarantine Problems

* Pesticide/Antibiotics Shrimps US, Japan

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Number of Contravention cited for US Food and Drug Administration import detention, August 2000-July2001 Reasons for contravention India Pakistan Sri Lanka Bangladesh Nepal

Food Additives 159 (7.4)

12 (1.3)

1 (3.0)

Pesticide Residues 41 (1.9)

Heavy Metals 13 (0.6)

4 (0.4)

Mould 9 (0.4)

Microbiological contamination 329 (15.3)

49 (5.5)

12 (36.4)

Decomposition 7 (0.3)

Filth 568 (26.4)

12 (1.3)

2 (11.1)

12 (36.4)

Low acid canned foods

87 (4.1)

25 (2.8)

9 (50.0)

3 (9.1)

Labeling 338 (15.7)

50 (5.6)

3 (16.7)

1 (3.0)

Others 597 (27.8)

744 (83.0)

4 (22.2)

4 (12.1)

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Total 2148 896 18 33 1

Source: US Food and Drug Administration import detention report, 2001. Note: Parenthesis gives the percentage share

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Western Environmental Laws on Textile Products

Country Products Law Status Standard Parameter

Germany Textile articles Dangerous Legislation Compulsory Formaldehydesintended for Substance labeling whenskin contact Act, 1993 exceeding

1500 ppm

France Textile articles N. A. Future Not to exceed Formaldehydesintended for Legislation 200 ppmskin contact

The Netherlands Textile articles N. A. Unofficial Not to exceed Formaldehydesintended for standards 100 ppmskin contact

Germany Textile Products Chemical Legislation Not to exceed Tetrachlorophenol

Act, 1993 5 mg/kg

The Netherlands Textile Products Staatscourant Legislation Not to exceed Tetrachlorophenol

nr. 35, Act, 5 mg/kg 1994

Sweden Textile Products N. A. Future Not to exceed TetrachlorophenolLegislation 5 mg/kg

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Western Environmental Laws on Textile Products

Country Products Law Status Standard Parameter

Germany Clothing, clothing Fourth Act Legislation Prohibition Azo-dyesmaterial, bedding, amending (Appendix 1)towels, underwear, the Germanouter clothing, Commoditysportswear Goods Act,

July 1995

The Netherlands All garments, Dutch Legislation Prohibition Azo-dyesfootwear, Commodity (Appendix 1)bed linen Goods Act

(warenwet)

Sweden Clothing, clothing N. A. Future Prohibition Azo-dyesmaterial, bedding legislation (Appendix 1)towels, underwearouter clothing,sportswear

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Textiles and Leather

* Eco Labels

- Germany(2): For lower content of pollutants

Norms for production processes

- European Largest Textile and Apparel Companies (ELTAC) (1): For ecological perspectives

* Dye Stuffs: Ban

Cobalt Blue and Sulphur Black

* Ban on PCP import of Busan 30

* Central Leather Research Institute (CLRI) working on other substitutes

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SOCIALLY RESPONSIBLE TRADING

* PROTECTION OF CHILDREN- Please describe any facilities provided for employees’ children

- What medical facilities are available? e.g. First aid kits, medical centre, medical insurance.

* ENVIRONMENT- Adequate fire protection- Fire extinguishers, evacuators

* FACILITIES- canteen facilities are available on site- What accommodation is provided for workers?

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SOCIALLY RESPONSIBLE TRADING

* EQUAL OPPORTUNITIES:- Are women and ethnic minorities represented in all areas and levels of the company?- What is the maternity entitlement for women

workers?

* FREEDOM OF ASSOCIATION- Do you recognise any trade unions on site?

* WORKING HOURS- Working hours per week- Workers paid for working overtime- Daily rest/break periods given- Pay the workers receive if they are sick or injured

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Market Size for Organic ProductsMarket Size for Organic Products

Country Approx. Retail Yeara Organic Share of Import Share Average Retail Value (US $) Total Food Sales of Organic Sales Price Premium

Austria $270 million 1997 2.5% 30% 20%-30%

Belgium $75 million 1997 1.0% 50% 20%

Denmark $190 million 1997 <3.0% 25% 15%-40%

France $508 million 1996 0.4% 10% 25%-35%

Germany $1.6 billion 1997 1.5% 60% 30%

Netherlands $230 million 1997 1.5% 60% 15%-20%

Sweden $200 million 1997 2.0% 30% 15%-50%

UK $445 million 1997 2.0% 70% 0%-30%

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Market Size for Organic ProductsMarket Size for Organic Products

Contd….

Country Approx. Retail Yeara Organic Share of Import Share Average Retail Value (US $) Total Food Sales of Organic Sales Price Premium

Canada $68 million 1995 1.0% 80% 30%

Australia $60 million 1995 0.2% 0%-13%b 12%-65% b

China c $1.2 billion 1995 6.0% d 0% 30%

Japan c $1.7 billion 1997 1.0% 1% 20%-30%

a Year given is for retail value data; b Varies by state;c In this country, organic includes “low chemical.”;d Based on production value, not retail sales.

Source: American Journal for Agriculture Economics, Vol. 80 No. 5, 1998, pp. 1125-1129.

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Policy Options

* Developing countries would have to upgrade national infrastructure system for

- Testing

- Certification

- Laboratory accreditation

- Global standards

* Developing countries to draw inferences from OECD

efforts for Mutual Recognition Agreements (MRAs)

* Export Assistance Centres (EACs) at Export Promotion Councils to help SMEs collect information about ETBs etc.

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Policy Options

* Ratification of Biosafety Protocol

* EFPs exporters face

- Certification costs

- Technical constraints

- SPS measures

* R & D and other support for EFPs

* Developing countries should immediately develop a database to profile trade and environment related cases at one place

* Export Assistance Centres (EACs) to feed in the formal process of data collection