CENTRE FOR POLICY DIALOGUE (CPD) Impact of Market Access Barrieres and Subsidies: The Case of Shrimp in Bangladesh Presented at the Hong Kong Trade and Development Symposium Session on Fisheries and Trade – Exploring Opportunities for Advancing Sustainable Development Hong Kong: 15 December 2005 by Dr Fahmida Khatun Senior Research Fellow, CPD E-mail: fahmida@cpd-bangladesh.org CENTRE FOR POLICY DIALOGUE (CPD) a c i v i l s o c i e t y t h i n k - t a n k B A N G L A D E S H House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Tel: (880 2) 8124770; 8130951; E-mail: cpd@bdonline.com Website: www.cpd-bangladesh.org

I. Introduction 1.1 Objective This presentation seeks to discuss: Trend of shrimp exports and major markets of shrimp The issue of market access, in the context of emerging trade barriers The impact of market access barriers and subsidies on shrimp sector in Bangladesh Challenges and opportunities of shrimp culture Recommendations

I. Introduction 1.2 Trade in Shrimp products Global shrimp production is dominated by less developed countries Trade flows from less developed to developed countries Largest exporters of farmed shrimp are Thailand, Ecuador, Indonesia, India, Mexico, Bangladesh and Vietnam EU is the major export market for shrimp, amounting to 52.1% of the total market. Exports to USA and Japan are 38.6% and 4.5% respectively

I. Introduction (Contd.) 1.3 Importance of the Shrimp Sector in Export Basket of Bangladesh * Exports of shrimp account for about 5% of total exports from Bangladesh. Shrimp constitutes of more than 70% of the export of primary products from Bangladesh. In 2004 the exports brought in US$ 362.87 mln * Shrimp production by aquaculture is a 100% export oriented industry in Bangladesh. Production takes place in an area covering about 1410,000 ha. There are 128 shrimp processing factories * Directly or indirectly about 22 million people are engaged in upstream and downstream activities related to the country's shrimp production and export

II. Emerging Trade Issues Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT) Anti-dumping Subsidies and Countervailing Measures (SCM) Social and Environmental Standards

III. The Issue of Market Access On the face of it, SPS and TBT provide WTO members on opportunity to safeguard their interests in crucial areas such as health and hygiene However, there is a growing apprehension that certain provisions of the SPS agreement can act as protection instruments It is apprehended that if special safeguard clauses are not exercised, access of LDC products to developed country markets may be seriously constrained. Export potentials including that of fisheries can be undermined. Anti-dumping cases are also concerns for developing countries. It has been a companion of salmon trade since 1989. Particularly for exports to the US: Chilean and Norwegian Salmon, Vietnamese catfish faced dumping complaints Subsidies to the fisheries sector have been identified to be the cause of revenue loss, over capacity, over fishing and stock depletion. ‘Friends of Fish’ estimated $14-$20 billion annually as the subsidy which is 20-25 percent of revenue from the sector. Social and environmental standards added new dimensions in the analysis of sustainable fisheries and international trade. Apprehended to be trade restrictive.

IV. Impact of Trade Measures SPS Measures - EU Ban on Shrimp Exports from Bangladesh in 1997 A. On Stakeholders (1) PRODUCERS/FARMERS – low price, loss of income (2) TRANSPORTERS – new investment, financial loss (3) PROCESSING FIRMS – big investment (4) PROCESSING WORKERS – loss of employment, diversification of employment (5) WOMEN PROCESSING WORKERS - unemployment, loss of income, changed power balance in the family, dislocation of family, increased expenditure, social vulnerability

IV. Impact of Trade Measures (Contd.) B. On Export Earnings The provision of the Agreement on SPS measures worked against Bangladesh—the provision states, “countries are allowed to maintain higher standards than international relevant standards”. The EU maintains higher standards than the USA and Japan who did not ban the export of shrimp  Ban put the country’s shrimp export industry under severe strain and led to serious market disruption during which export of shrimp to the EU from Bangladesh was zero. This led to a loss of about $ 65 mln in foregone exports (Cato and Santos, 2000)  Shrimp export to the USA and Japan increased to cover up for the loss of export to the EU, but still Bangladesh suffered a loss about $14.7 mln

V. Impact of Subsidies V.1 Types of Incentives Fisheries sector receives general incentives given to the export sector in general Special support includes a value added tax (VAT) refund on fuel at the rate of 15 percent per litre, subsequent to the export of fish V.2 Study of Marine Fisheries General incentive package has no detrimental effect on fishing practice Scope for applying more efforts Implies that in the absence of market distorting subsidies the country may increase its foreign earnings from exports and still maintain a sustainable stock

VI. Challenges and Opportunities Challenges: Domestic Environmental Degradation: Negative environmental impacts: Salinisation of the soil Decline in soil fertility Reduction in agricultural production due to reduction in agricultural land and soil fertility Decrease in cattle production as a result of decline in grazing land Health hazards from water pollution Destruction of ecosystem (e.g. mangrove forest in Bangladesh due to shrimp aquaculture)

VI. Challenges and Opportunities (Contd.) Challenges: International “MARKET ACCESS” Removal of trade barriers Better understanding of WTO obligations Technical Assistance and Capacity Building

VI. Challenges and Opportunities (Contd.) The demand for fishing products is growing Increase in production efficiency is required for large-scale industrial farms as it is not fully exploited Technological improvement will increase the supply of shrimp. Removal of market access barriers and higher demand will increase the production of shrimp aquaculture Shrimp culture is expected to continue to play an important role in ensuring food security and poverty alleviation, particularly for the rural poor. The urban population will benefit from the improvement in processing, value adding, marketing and the fish industry as a whole

VII. Recommendations Assessment of the Sector to Determine the Needs Monitoring of Shrimp Farms and Close Supervision of Quality Control Access to Information on technological improvement and change in global policies Market Diversification to Avoid Sudden Shocks Financial Support to Small Farmers Infrastructural Development for Better Processing, Handling and Storing Facilities Ensuring Security and Reducing Tensions Capacity Building in Trade Issues

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