IMPACT OF WTO ON

HORTICULTURAL SECTOR OF INDIA

KIREETI.K (F-2011-02-M)

INTRODUCTION

The WTO... In Brief•The result is assurance. Consumers and producers know that they can enjoy secure supplies and

greater choice of the finished products, components, raw materials and services that they use. Producers

and exporters know that foreign markets will remain open to them. The result is also a more prosperous,

peaceful and accountable economic world.

•By lowering trade barriers, the WTO’s system also breaks down other barriers between peoples and

nations.

•At the heart of the system — known as the multilateral trading system — are the WTO’s agreements,

negotiated and ratified by a large majority of the world’s trading nations, and signed in their parliaments.

•Their purpose is to help producers of goods and services, exporters, and importers conduct their

business.

•The goal is to improve the welfare of the peoples of the member countries

AGRICULTURE 

Negotiations on agriculture began in early 2000, under Article 20 of the WTO Agriculture Agreement.

By November 2001 and the Doha Ministerial Conference, 121 governments had submitted a large

number of negotiating proposals.

The declaration reconfirms the long-term objective already agreed in the present WTO Agreement: to

establish a fair and market-oriented trading system through a programme of fundamental reform.

The programme encompasses strengthened rules, and specific commitments on government support

and protection for agriculture.

The purpose is to correct and prevent restrictions and distortions in world agricultural markets.

India is naturally endowed with diverse and varied agroclimatic conditions and a vast reservoir of

resources and soil regimes for growing a wide variety of crops for domestic consumption and

export.

Added to this is the large community of knowledgeable farmers who have been able to adapt

themselves to the changing requirements of growth and diversification dictated by the global

scenario.

Promotion of agricultural exports is looked upon as an important instrument for boosting growth in

the rural and “real economy” and creating conditions for improving the returns to the farmers.

We are also aware that the Government of India’s EXIM POLICY (2007-2012) endeavours to give the

necessary momentum and direction to the country’s export drive.

The world trade regime under the WTO has also opened up new export possibilities and new vistas

for the farmers to earn higher values for their produce.

•The WTO, in fact the Agreement on Agriculture (AoA), provides new opportunities for export of

agriculture products and, in this respect, India has yet to take advantage of the emerging

opportunities to enlarge its trade, particularly with the widening of the global market.

•India is good in producing fruits and vegetables (the second largest producer with 150 million

tonnes), spices (world’s largest producer, with over 3 million tonnes).

•Over the years, horticulture has emerged as one of the potential agricultural enterprise in

accelerating the growth of economy.

•Its role in the country's nutritional security, poverty alleviation and employment generation

programmes is becoming increasingly important.

• It offers not only a wide range of options to the farmers for crop diversification, but also provides

ample scope for sustaining large number of Agro industries which generate huge employment

opportunities.

•At present, horticulture is Contributing 24.5% of GDP from 8% land area.

India’s share in world production being nearly 10 per cent in fruits and 14 per cent in vegetables.

India produces 50 per cent of world’s mangoes, 19 per cent of banana, 36 per cent of cashew nut,

more than 10 per cent of onion, 38 per cent of cauliflower, 28 per cent of green peas, etc.

Despite all this, our share in the world exports of fruits and vegetables is only about 1 per cent.

And it is only about 2 per cent of the fruits and vegetables produced in the country is processed

and there is considerable potential to increase it to about 10 per cent.

An area that emerges as highly potential for exports in the years ahead, among the agricultural

exports, is the processed food products.

The export of fresh fruits and vegetables and processed fruits and vegetables continue to remain a

mere 6 per cent of the total value of exports, despite the institutional support to boost their exports,

though there are indications of a steady rise in their exports.

Even in developing countries such as Malaysia (80 per cent) and Thailand (30 per cent) it is very

high. Similarly, value addition in India is estimated at 7 per cent as compared to 45 per cent in The

Philippines and 23 per cent in China.

BASIC PRINCIPLES & ISSUES OF WTO

NON DISCRIMINATION

A country should not discriminate its trading partner i.e. every member country will be granted the

same status that is granted to Most Favoured Nation. It means that products made in member’s own

country are not given any favourable treatment in comparison to the products which originated from

other member countries and are imported into their territory. It includes that the procedures and

standards which are applicable to the domestic industry will automatically be implied to the imported

goods i.e., once a foreign good satisfies the conditions including payment of customs duty and/or other

charges, it will be treated no less favourably in terms of taxes and measures with equivalent effect than

domestic goods.

RECIPROCITYThe agreements administered by WTO are based on a balance of rights and obligations achieved

through reciprocal exchange of market access commitments. The open trading system is to be

based upon the rules for bringing competition.

An important goal of the WTO is to facilitate the availability of the goods across the border.

This agreement also helps in increasing the transparency under the trade regimes.

Through this Agreement, the trade across the borders is only governed by imposition of tariffs while

rest of the quantitative restrictions, such as quota are to be waived off in a phased manner.

In order to exploit the marketing accessibility, competitiveness of a product with respect to its price

and quality is a fundamental criteria.

MARKET ACCESS

 

The main objective of this principle is to discourage the unfair trade practices such as export

subsidies and dumping of products at below cost to gain market share.

It is being carried out through regulation of subsidies on export and imposition of anti-dumping

duties.

FAIR COMPETITION

 

Agreement on Agriculture has 4 main components, namely: -

 

· Concession and commitments on market access

 

· Domestic support and export subsidies

 

· The Agreement on sanitary & phytosanitory measures, and

 

· Ministerial declaration concerning least developed and under developed countries

 

AGREEMENT ON AGRICULTURE

However, the other subsidies which are also called green subsidies are presently being

allowed under this agreement.

The allowed subsidies are basically broad based in terms of research and pest and disease

control, training services, extension services, marketing and promotion services, infrastructural

services in order to exploit the market accessibility.

After going through the agreement, it clearly comes out that in order to exploit the facilities

being given in the above agreement, there is need to overcome the infrastructure inadequacy and

other impediments to the large scale investments.

Apart from this, it is necessary that post-harvest technologies for food processing and

preservation should be promoted so as to bring about added value to the agriculture economy.

 

AOA

Finally, the gain or loss to a country as a result of liberalisation will largely depend on achieving the

market accessibility through providing the green box subsidies.

 

Indian export basket consisting of agro-based products and manufacturing items suffers from

considerable supply related problems. So far as the agro based products are concerned, the

question of surplus is most critical.

In case of manufacturing products, there are serious problems of competition relating to high cost,

inefficiency in production, outdated technology, problems related to delivery schedule and product

specification.

The objective of this Agreement is to improve health or life of human, animal and plant and

overall phyto-sanitary situations in all the member countries.

This agreement states, that the measures should not be applied in a manner, which would result in

a means of arbitrary or unjustifiable discrimination between the members.

In other words, it means that the sanitary and phyto- sanitary measures applied by each

member country should be based on scientific justification and to the extent possible, it should

take into consideration, the international standards and guidelines already available.

The major articles in the Agreement having an effect on the horticulture produce are as follows

AGREEMENT ON SANITARY AND PHYTO-SANITARY (SPS) MEASURES

 

 

This Article states to harmonise the sanitary and phyto-sanitary measures, which basically include

levels of food additives, contaminants, pesticide residues, microbiological criteria and other related

toxins with the international standards and guidelines.

This process of harmonisation is crucial with respect to both exports and imports.

This issue of harmonisation is also required when we enter into an equivalence agreement for

exporting our goods into other countries.

ARTICLE 3 ON HARMONISATION

Article 4 of the Agreement directs the WTO members to accept SPS measures of the other countries

as equivalent even if these measures differ from their own or from those used by other countries

trading in similar products, provided, the supplier country can demonstrate to the importing country

that its measures achieve the importing country’s appropriate level of SPS protection.

Under this Article, WTO members can also enter into bilateral or multi-lateral agreements on mutual

recognition of equivalence of specified SPS measures.

ARTICLE 4 ON EQUIVALENCE

ARTICLE 5 ON SPS MEASURES TO BE BASED ON SCIENTIFIC EVIDENCE

As per Article 5 of the Agreement, countries are required to ensure that the measures of SPS

protection are based on risk assessment on the basis of available scientific evidence, production

processes and environmental conditions.

ARTICLE 7 ON TRANSPARENCY  

According to Article 7 (transparency), all WTO members have an obligation to notify to the WTO

committee, any changes in their SPS measures.

ARTICLE 9 ON TECHNICAL

ASSISTANCE 

As per Article 9, the WTO members are expected to facilitate technical assistance to other members

especially the developing countries either bilaterally or through the relevant international

organisations.

ARTICLE 10 ON SPECIAL & DIFFERENTIAL

TREATMENT As per Article 10 of the SPS Agreement, Special and Differential Treatment (SDT) is required to be

provided to the developing countries, whereby, longer time frames for compliance with SPS measures

are supposed to be provided by the developed countries.

MANGO AND GRAPEJapan, Australia and China have banned imports of mangoes and grapes from India on account of

presence of certain fruit flies. China has imposed a ban on grapes for a species of fruit fly that does

not even exist in India.

It has taken more than five years to develop the protocols and inspite of this lifting of the ban is not

anticipated in the near future.

In the process, we are likely to lose a total of about 10 years before India can think of actually

exporting these fruits to Japan.

It is, informally learnt that these restrictions are actually a non tariff barrier to trade because of

the commercial interest of Japanese companies in Philippines and Thailand, where they have

their own mango orchards for meeting the Japanese demands. The Indian mangoes could reach

Japanese market only in July 2006.

COFFEEThe European Union (EU) introduced a regulation prescribing unreasonably low levels of

Octratoxin-A (OTA) in coffee.

PRODUCTS FACING SPS RELATED PROBLEMS

GRAPESThe European Union (EU) has introduced regulations on pesticide residue levels in fruits and

vegetables imported from different countries.

Indian exporters are required to comply with the maximum pesticide residue levels for exporting

their products to the EU. This problem has specially been faced in exporting grapes

GHERKINS

TEA AND SPICES

HONEYWhile this appears to be an appropriate level of protection, the procedure of implementation is

cumbersome.

. PESTICIDE RESIDUE PROBLEMS

FACTORS GOVERNING COMPETITIVENESSLACK OF RANGE OF VARIETIES

While a wide variety of germplasm is available in most of the horticultural commodities, varieties most

suited for exports have not been adequately identified in several crops.

Work on developing export -oriented varieties and those suited for value addition needs to be given due

priority

PRE- HARVEST PRACTICES TO CONTROL POST HARVEST LOSSES

Several post harvest diseases and pests can be avoided with appropriate pre-harvest treatment.

Apart from this, pest infestation is also a problem, which is affecting the price realization of

Indian produce in the market.

LOSS OF PRODUCE AT THE PRIMARY LEVEL

There is significant loss of produce at the primary production level as a result of inappropriate

harvesting methods.

Efforts would be needed to popularize the same among the farmers.

LACK OF ADHERENCE TO MATURITY INDICES

The maturity indices in most of the horticultural crops are either not available or not followed by

the farmers resulting in harvesting of these crops at varied maturity levels

Hence, there is need to create awareness about the maturity indices of different horticultural

commodities among the farmers both for catering the needs of export market and for

marketing of produce in distant locations within the country.

LACK OF FACILITIES FOR PHYSICAL AND CHEMICAL TREATMENT AFTER HARVESTING

Several post harvest treatments are recommended for minimizing post harvest losses in different

horticulture commodities. However, adequate facilities for large-scale treatment are not available

at the farm level.

LACK OF POST HARVEST INFRASTRUCTURE AND LOGISTICS

In order to maintain the quality of horticultural commodities there is need to develop proper

infrastructure in terms of pre-cooling units, grading and packing houses in the producing

areas.

NEW OPPORTUNITIESORGANIC FARMING

While a wide variety of germplasm is available in most of the horticultural commodities, varieties most

suited for exports have not been adequately identified in several crops.

Work on developing export -oriented varieties and those suited for value addition needs to be given due

priority

PRE- HARVEST PRACTICES TO CONTROL POST HARVEST LOSSES

Several post harvest diseases and pests can be avoided with appropriate pre-harvest treatment.

Apart from this, pest infestation is also a problem, which is affecting the price realization of

Indian produce in the market.

FACTORS GOVERNING COMPETITIVENESSLACK OF RANGE OF VARIETIES

While a wide variety of germplasm is available in most of the horticultural commodities, varieties most

suited for exports have not been adequately identified in several crops.

Work on developing export -oriented varieties and those suited for value addition needs to be given due

priority

PRE- HARVEST PRACTICES TO CONTROL POST HARVEST LOSSES

Several post harvest diseases and pests can be avoided with appropriate pre-harvest treatment.

Apart from this, pest infestation is also a problem, which is affecting the price realization of

Indian produce in the market.

Between 1994 and 2003, we were busy finding faults with the WTO Agreement rather than paying

attention to enhancing the productivity, quality, diversification, value addition and sustainability

aspects of our agriculture.

As a result, the mismatch between production and post-harvest technologies persists and the

infrastructure for handling perishable commodities continues to be poor.

The experience has, thus far, shown that WTO has no visible agenda for the resource-poor farming

families.

Globalisation has proved to be inherently asymmetric in its impact.

Countries most dependent on export of primary commodities have not been able to derive benefit

from a “free trade” regime.

Rich nations are not prepared to phase out trade distorting subsidies and provide increased market

access to predominantly agri- developing countries.

Globalisation creates losers as well as winners, and entails risks as wells as providing

opportunities.

WTO IMPACT: GLOBALISATION AND TRADE FOR DEVELOPMENT

1. There has been a growing divergence, not convergence of income levels, both between countries

and people.

2. Inequality among and within nations has widened.

3.Assets and incomes are more concentrated and wage share fallen while profits share have risen.

4.Capital mobility alongside labour immobility has reduced the bargaining power of the organised

labour.

5.The rise in unemployment and with more and more people working in the informal sector, has

generated an excess supply of labour and depressed real wages.

EFFECTS AND IMPACTS OF WTO AND THEIR RELEVANCE TO INDIA’S HORTI-EXPORTS.

PRODUCT GROUP MAJOR IMPORTING COUNTRIES

Floriculture USA, The Netherlands, UK, Germany, Japan

Fruits & Vegetable Seeds USA, Pakistan, Japan, Bangladesh, The Netherlands

Fresh Onions Bangladesh, Malaysia, UAE, Sri Lanka, Bahrain

Other fresh vegetables UAE, Nepal, UK, Saudi Arabia, USA

Walnuts Spain, Germany, UK, Egypt, The Netherlands

Fresh mangoes Bangladesh, UAE, Saudi Arabia, UK, Nepal

Fresh Grapes The Netherlands, UK, UAE, Bangladesh, Germany

Other fresh fruits Bangladesh, UAE, Nepal, Saudi Arabia, The Netherlands

Dried & Preserved Veg Bangladesh, Sri Lanka, USA, UK, UAE

Mango Pulp Saudi Arabia, The Netherlands, Yemen, UAE, Kuwait

Pickles & Chutneys Russia, USA, France, Belgium, Spain

Other processed fruits/Veg USA, Israel, Saudi Arabia, UK, the Nethrlands

MAJOR IMPORTING COUNTRIES

Horticulture sector has a great potential for export.

Export of Horticultural produce in H.P. can be concentrated on crops where Himachal has a

comparative advantage in terms of climatic suitability for production of various traditional crops.

Similarly we could also concentrate in exports of fruits and vegetables such as apples. pears,

peaches, kiwis, almonds, apricots, some citrus fruits, and exotic vegetables grown

organically, vegetable seeds, floriculture produce especially in the form of seeds and disease free

cuttings.

 In conclusion they laid stress on the improvement of quality of products of industrial sector,

proper implementation of the export strategies and negotiations with WTO.

WTO AND HORTICULTURE SECTOR IN H.P.

HPMC has stressed upon the issues and concerns related to the export of fruits and fruit

products from0Himachal Pradesh.

They have also attempted a SWOT analysis for export from H.P., status of apple imported to

India and exported from India, initiatives taken up by HPMC for export of Apple Juice

Concentrate (AJC) and the steps taken and required by state to meet the challenges of WTO.

H.P. produces around 36% of apples, which constitute around 81% of total fruit production in

H.P. The area under apple cultivation has increased from 3, 025 ha in 1960-61 to 2, 08,154 ha.

in 2010-11. The strengths under SWOT analysis included the suitable agro climatic conditions,

clean & pollution free environment, good governance, locational advantage for export to

neighboring countries, high literacy rate 83.78 % – educated and hard working farmers

community, adopting latest technology, reforms in Agriculture Marketing set up, participation

of private players, establishment of modern grading and packing facilities, CA stores, cool

chain facilities in public and private sector, unique flora and fauna and introduction of globally

accepted varieties of fruits

 

 

 

 

 

ISSUES AND INTERESTS OF H.P. HORTICULTURE SECTOR

IN INTERNATIONAL TRADE AND WTO REGIME

 

Weaknesses under SWOT analysis enlist the tough geographical situations, small

fragmented holdings, dying old orchards, processing facility with old technology, inadequate

Grading Packing/ CA capacity, poor rail and air connectivity, week logistic support,

inadequate processing capacity, lack of vegetable processing facilities/ drying unit, knowledge

deficit in international trade– need for training and capacity building.

 

There are opportunities for the export of fruit crops like apple such as, setting up of markets in

private sector/ farm markets/ consumer markets/ contract farming and direct farming,

Introduction of single point levy system, farmers representation in boards and committees,

import of better plant material, rejuvenation of old senile orchards, and the import and

installation of modern infrastructure for grading / packing and other facilities.

 

 

 

 

 

Continued…

 

 

The Himachal Apple is being exported to the neighbouring countries like Bangladesh, Nepal,

Indonesia, Vietnam and UAE. Therefore, we need to improve the quality of apples and to explore a

good number of other nations where demand of Indian apple is good.

 

The following issues were stressed: 

 

• Export Initiatives taken up by HPMC: HPMC has exported apples from Kinnaur to

England and exports of Apple Juice concentrate (AJC) undertaken since 1990-91 to Germany,

Holland, South Africa, European countries, USA and Ghana. “With latest upgradation of

computerized grading packing lines HPMC will be able to export quality apples”.

 

• Constraints in export of Apple Juice Concentrate: Lack of better technology,

outdated plant and machinery and inadequate capacity to meet even domestic demand are the

major constraints.

 

Continued..

 

 Implications of WTO on Apple Industry: Imports of apple from USA, Australia, New Zealand

and China have increased manifold during last few years. And apple import increased from 21,622

M.T. in 2004-2005 to 134,577 M.T’s in 2010-2011.Thus, import duty on foreign apple should be put on

the maximum bound rate as applicable on other fruits from the present rate.

 

Apple should be declared as “special product”: As the apple industry operates under various

difficulties and constraints of small scattered land holdings (0.3 to 1.20 h.a ) & physiological quality

of apples in State is not comparable to that produced in advanced countries under favorable

conditions employing mechanized and advanced scientific post harvest techniques, the apple

should be declared as “ Special Product”.

 

Few steps taken by the State to meet the challenges of WTO, which mainly include;

Replacement of old and uneconomical plantations, import of virus free rootstock by Government;

improved, high yielding and globally popular varieties, CA stores set up by HPMC; and packing

houses of HPMC equipped with latest machinery to bring about standardization with assistance

of APEDA. He recommended that the financial assistance could be sought from the revenue earned

from carbon credits to develop the horticulture sector.

Continued..

(i) Lack of a broad raw material base in terms of the kinds and varieties of fruits and vegetables

suitable in all respects for processing and their availability in commercial quantities at prices

economical to the processing industry. Invariably, the cost of the raw material is high.

(ii) Low productivity and poor quality of the produce as compared to the very high levels obtained in

the advanced countries affect processing and none of the processing units work to full capacity

utilisation. Much of the produce taken up for processing is devoid of the quality attributes or

characteristics required for processing.

(iii) Despite the WTO and the Agreement on Agriculture (which focuses primarily on reduction of

tariffs, increased market access, reduction in Aggregate Measure of Support in the form of

subsidies) subsidies continue as a result of which the expected gains have eluded developing

countries like India.

(iv) Imposition of non-tariff barriers like sanitary and phyto sanitary (SPS) conditions on imports

from developing countries. Lack of awareness and knowledge about the SPS measures and quality

standards required to be adopted by the processing industry and exporters.

(v) Fruits and vegetables are generally constrained by poor price support, credit support and

delivery system which affect processing.

(vi) The quality of packaging is poor. Importing countries demand specific packaging for each

produce and the use of bio-degradable materials resulting in high cost of packaging.

MAJOR CONSTRAINTS OF HORTI-EXPORT SECTOR

vii) The emergence of trading blocs in Asia, Europe and North America have also considerably affected

India’s agri-export trade.

(viii) Due to poor infrastructure in handling, transport, marketing and processing, horticulture, as an

industry, has not grown in our country. Poor infrastructure, particularly transportation, road networks,

and freight and cargo facilities, cold storage facilities, etc., coupled with inadequate post-harvest

management affect the produce and products.

(ix) Inadequate supply of power, water and research and development support add to the constraints.

(x) The freight rates in India are reported to be around 50 to 100 per cent higher than those prevalent in

some other countries which does very little to improve our competitiveness.

(xi) It is the residual rather than the fresh produce that is often taken up for processing, which has a

bearing on quality.

(xii) Lack of a proper marketing strategy geared to meeting the raw material requirement of processing

units and ensuring a sustainable export market for the processed products.

(xiii) Poor and inconsistent quality of processed products and inadequate export promotion are some

of the constraints plaguing the processing industry.

Infrastructure Development

Marketing Strategy

Contract Farming

Market Access and Information

Trade Related Intellectual Property Rights

Credit Facilities

Economies of scale

SUGGESTIONS FOR PROMOTING HORTICULTURE

Traditional Vs Innovative

Traditional mango Transportation methods are not ideally suited to

effective food hygiene

Innovative mango Transport methods

hyy

Traditional Vs Innovative

Traditional mango packing methods are not ideally suited to

effective food hygiene

Innovative mango packing methods

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Supply to Retail Supermarkets which are coming up with high pace

WHERE ARE LACUNAE ?

Fragmented land holding

Very poor backward and forward linkages

Poor infrastructure

Lack of post harvest Technology

Poor logistics

Supply Chain Management missing

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SUPPLY CHAIN MANAGEMENT

End use based production

Contract cultivation

Captive cultivation

Cluster approach in cultivation

Supply just in time-production logistics

Quality production

Post harvest technology application

Scientific storage

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END USE BASED PRODUCTION

Local market for table purpose

Long distance market within country

As raw material for processing and for definite product manufacture

Produce what market / consumer wants

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COMPETITIVENESS

Key issues in supply chain……….

Global and local competitiveness

Quality competitiveness

Cost competitiveness

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QUALITY COMPETITIVENESS

Variety

Controlling quality during growth

Harvesting and Maturity standards

Post harvest handling

Post harvest treatments

Packaging and storage

Safety and Hygiene

Traceability

hyy

QUALITY PRODUCTION

Variety

Season

Horticultural practices

Integrated water, nutrient, pest and disease, weed management

Training/Prunning

Growth regulators

Organic cultivation

Harvesting methods/maturity standards

hyy

COST COMPETITIVENESS

Cost of production

Productivity

By-product and waste utilization

Off season production

Marketing logistics

Value addition

Presentation in market

hyy

SUPPLY JUST IN TIME – LOGISTICS

Determine what buyer wants?- Variety, Quality, Stage of maturity

Determine when he wants?- Frequency

Determine how much he wants?- Quantity, Lot size, Duration

Determine how he wants?- Grading, Packaging, Transport mechanisms

Determine where he wants?- at farm, Port

hyy

SERVICE PROVIDERS

Aggregators

Logistic support

Cold chain

Warehousing

Port handling

Credit facilitators

IT related services

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CONCLUSION

In conclusion, let us remember the quote from our eminent agricultural scientist, Dr M S

Swaminathan, “India should ensure that all boxes in the WTO must be abolished, and trade

distortion, and unfair practices must be spelt out clearly and factors governing sustainable livelihood

should be recognised so that resource-poor, developing countries should be able to place

restrictions on imports.”

THANK

YOU

KIREETI.K (F-2011-02-M)