Standards and Trade: Background/results of the project Veena Jha Geneva, 16 and 17 May 2002 UNCTAD

The project

Reasons for undertaking the project Benefits of liberalized agricultural trade not to be reduced by disguised restrictions or other non-tariff barriers to trade Developing countries feel that standards and SPS measures are as important as traditional WTO issues such as tariffs and quantitative restrictions. Therefore, both the AoA and the SPS were negotiated as part of an “agricultural package”

Lessons learned Importance of the standards examined in the market place? Compliance costs and trade effects Protection versus protectionism Regional strategies

Potential problems Lack of transparency Complexity of SPS standards Threshold limits Standard takers instead of Standard Setters Relevance of the standard to the production conditions of the exporting countries Domestic Regulatory Problems

Economic/developmental effects of SPS measures and environmental standards Compliance costs Trade impacts Impacts on industry

Economic/developmental effects of SPS measures and environmental standards Legislation Training Infrastructure Engagement in international negotiations

Can SPS measures and environmental standards be protectionist? Motivation: Protecting national producers against import competition? Creating a market for conformity assessment? Lowering prices? Perceptions: Insufficient scientific evidence Lack of coherence in standards

South Asia

Sectors/cases Marine products Bangladesh, India, Pakistan HACCP EU import bans PeanutsIndiaResponding to aflatoxin standards Mango pulpIndiaQuality issues RiceIndia, PakistanStandards for pesticides residues SpicesIndia, Sri LankaDealing with aflatoxin standards / other SPS measures TeaIndiaMeeting standards on pesticides residues

Fish and fisheries products Automatic detention (United States) Value of detained products from India etsimated at US$ 14 million or 15% of total exports in HACCP and other requirements Import bans (EU)

Perceptions Certain standards are not strictly relevant for product quality Certain standards are too stringent given Indian fishing conditions The legitimate objectives of standards could be met through less cumbersome and less costly procedures Indian plants face more stringent standards than European plants (e.g. Indian plants have to undertake 62 tests to check water quality)

Implications Fixed costs for adjustments between US$ 250,000 and US$ 500,000 approved plants generally are large plants Out of a total of over 400 establishments in India, only 84 processing units have been approved for exports to the EU Many small companies were unable to continue exporting to the EU

Peanuts Different testing procedures and conformity assessments required in different markets New sampling plan (3 test Dutch code methodology) would result in higher rejection rate Experts believe that 75% of the rejected lots would actually fall within the established tolerance limits

Peanuts Europe: 47% of the world imports of groundnuts and groundnut products Multi-test plan will increase the cost of testing alone by US$ 4 million UK Government estimates that compliance costs would average 8% of turnover Increased costs of doing business in the EU market could be more than US$ 200 million according to JEFCA (Joint European Commission Food Association)

Mango pulp Quality a major hurdle when buyers have excess stocks or the prices are low Exports may have to accept price discounts, especially because of the perishable nature of the goods

Tea (1) It is alleged that in 1995, German limits of 0.01 mg of tetradifon and 2 mg of ethion per kg of tea were imposed somewhat arbitrarily because of lack of data from India The Teekanne Darjeeling Gold brand of tea was rejected because it contained 0.24 mg of tetrafidon per kg No rejections in United Kingdom; most Indian tea firms follow UK principles

Tea (2) Cost of testing required by Germany: US$ 234 per analysis Indian standards are more stringent than ISO 3720 standardans other countries’ standards, except Japan

Strenghtening capacities: national level Awareness raising National and regional standard setting Technology, innovation and enterprise development Small and medium sized enterprises Branding and umbrella certification Institutional changes

Actions at multilateral level Transparent and participatory preparation of standards Trade rules