1. U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Challenges in Conformity Assessment for developing countries Ouseph Padickakudi, Programme Manager, UNIDO UNIDO’s Perspective

2. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N World trade 1970 – 99 (trillion US$ - constant 1995) 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 197019751980198519901995 world low & middle income 2000 high income CURRENT TRADE SCENARIO

3. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N World trade 1970 – 99 (trillion US$ - constant 1995) 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 197019751980198519901995 2000 low income LDCs world low & middle income high income CURRENT TRADE SCENARIO

4. EXPORT PROMOTION (& Market Opportunities) ITC (AGOA + EBA) INTERNATIONAL AGREEMENTS & RULES FOR TRADE WTO INVESTMENT FACILITATION FINANCIAL FLOWS UNCTAD UNIDO STANDARDS & CONFORMITY ASSESSMNT INFRASTRUCTURE (TBT, SPS) UNIDO CUSTOMS PROCEDURES TRANSPORTATION DOCUMENTATION UNCTAD, IMO SUPPLY DEVELOPMENT (Capacity & Competitiveness) UNIDO A CONCERTED INTER-AGENCY STRATEGY FACILITATES MARKET ACCESS CompeteConformConnect

5. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Introduce supporting legislation, policies and institutional reform Strengthen supply capacity /improve competitiveness Support compliance with international standards and regulations Set up accreditation/ certification systems Strengthen capacity for implementation of the WTO agreements and trade negotiations Remove supply side constraints Prove Conformity with Technical Requirements Integrate into the multilateral trading system UNIDO WTO Module IModule IIModule III The UNIDO-WTO Framework Concept – The main programme modules

6. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N WTO ACCESSION REQUIREMENTS

7. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Non acceptance of test results by the national laboratories due to its non accreditation. Costly re-testing or products in the laboratories of importing countries. Non acceptance of certification mark of the exporting country. Imposing special conditions for packaging and labeling TECHNICAL BARRIERS TO TRADE

8. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Lack of awareness of IC ISO 17025 standards for quality management system in laboratories. Inadequate facilities for calibration traceable to international standards.. No proper institution for organizing proficiency testing of accredited laboratories. Difficulty in obtaining certified reference materials. Lab Testing TECHNICAL BARRIERS TO TRADE

9. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Management Systems- Becoming Standards Quality Management System (ISO 9000) –ISO 9000 does not signify specific quality level –Can apply for company or opt for THIRD Party –Third party certification facilitate trade –Used as a advertising/marketing slogan Environment Management System (ISO 14000) –Minimum compliance to environment laws and commitment to Continuous improvement –Important for global trade/ Environment protection MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity

10. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Management Systems- Becoming Standards Hazard Analysis & Critical Control Point HACCP –A food safety standard –Becoming mandatory for USA (Also possibly EU) –New ISO 22000 Food Safety Management –Expected Mid 2005 Social Accountability Standard SA 8000. –Avoid Child labour, exploitation –Union rights, Collective bargaining etc. (controversy) –ISO to develop a new SA standard _June 2004 Occupational safety standards (OHAS) MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity

11. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Management Systems- Becoming Standards Traceability EU Directive EC 178/2002 – 2005 –All Edible products, despite of their origin, will have to be accompanied by detailed information on source, production system and processing procedures so as to make consumers, sanitary and inspection institutions able to follow back and forward the distribution stream of the product. –A new Challenge – UNIDO Egypt First project Terrorism related Safety (Shipping) –Bio terrorism, MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity

12. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N M 1…n Lab Test 1 …n Certification 1 …n Inspection 1…n C 1…n Total Conformity Cost (TConfC) S 1…n Calibration 1 …n P 1…n TBT/SPS 1…n Sectors (S) Products in respective sectors (P) Markets (M) Requirements (TBT/SPS) Conformity (TCCI) Costs (C) UNIDO TCB Metrics Stage 1

13. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N SHRIMPS/The Netherlands Requirements: Product specific : Maximum Residue levels (Aldrin, DDT, Chlordane, Endrin, HCH, HCB) Cadmium, lead, mercury levels Polychlorinated Biphenyls (PCB), Terphenyles (TCB) Pathogenic micro-organisms Irradiation of Food Packaging Requirements applicable in the Netherlands Market specific: (from consumers) HACCP, ISO 14000, ISO 9000, SA 8000 International label for fish from -Marine Stewardship Council Environmentally Sound Production (ESP) UNIDO The case of shrimps exports

14. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N 15,350,000Total annual cost for 50 companies to export 100 thousand tonnes of shrimps to The Netherlands in 100,000 consignments. HACCP (food) ISO 9000 SA 8000 ISO 14000 Chemical Type of Test / Certificate 2,050,000504,000Environmentally sound production 2,050,000504,000Quality related market requirements 500,000503,000Social market requirements 2,450,000508,000 Packaging: Good Manufacturing Practice, Minimization of packaging 2,400,000 1,200,000 2,400,000 1,800,000 500,000 Total cost of testing ($C*Xn) 20,000 Nr. of tests (Xn) 120Maximum Residue Levels (MRLs) 60Contaminants in Food 120Polychlorinated Biphenyles (PCBs) and Terphenyles (PCTs) 90Cadmium, lead and mercury 25Additives and Flavorings in Food Cost per test ($C) REQUIREMENTS TBT/SPS SECTOR S PRODUCT P MARKET M Fisheries Shrimps EU / The Netherlands Hypothetical Country X Annual exports of shrimps: 100,000 tonnes Consignment rate/year: 100,000 Consignment inspection rate : 20% per consignment UNIDO TCB for Shrimp Exports to the Netherlands

15. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N SECTOR (S): Seafood/Fish PRODUCT (P) : Shrimps 100,000 tons/year @ $ 4.00/kg = $ 400 million Total Number of Exporting Enterprises: 50 Minimum Number of Test Samples: MARKET (M): The Netherlands MARKET REQUIREMENTS (TCCI): TESTING Maximum Residue Levels (MRLs) in fishery products Cadmium, lead and mercury in food Polychlorinated Biphenyles (PCBs) and Polychlorinated Terphenyles (PCTs) in fishery products Pathogenic micro-organisms in food and drink products (Details, see attached) CERTIFICATION: HACCP, ISO 9000, ISO 14000, SA 8000, OHSAS COSTS FOR SETTING-UP DOMESTIC TESTING FACILITIES LaboratoryEquipmentExpertiseTraining Accreditation Chemical $ 550,000 $ 60,000 $20,000 Microbiology $ 300,000$ 40,000 $ 15,000 Environmental conditioning of a laboratories @ $ 100,000: $ 200,000 Cost for standards services, ISO 9000 and ISO 14000 advisory capabilities: $ 300,000 Cost for HACCP and SA 8000 advisory capabilities: $ 300,000 Cost for calibration per enterprise @ $ 3,000/annually: $ 150,000 Metrology Laboratory EquipmentExpertiseTraining Accreditation Mass $200,000$ 30,000 $20,000 Dimension $ 250,000$ 20,000 $ 15,000 Temparature $ 70,000$15,000$ 10,000 Pressure $ 90,000$ 15,000 $ 10,000 Total cost micro-biological and chemical labs: $ 1,085,000 Total cost metrology/calibration labs: $ 1,030,000 GRAND TOTAL TCB INVESTMENT: Total $ 5, 415,000 GRAND TOTAL TCB INVESTMENT MAINTENANCE (10 %) : annual $ 542,000 Costs include only TA not local requirements, such as buildings, etc. Cost will be compared to costs of out- sourcing the tests and calibration Cost for setting up required systems @ $ 50,000/annually: $ 2, 500,000 TCB for Shrimp Exports to the Netherlands

16. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Import of 100,000 Tonnes to Netherlands: Annual Total Conformity Cost (TConfC): $15 Mn Conformity Cost: 3.8% of total market value Setting-up of Conformity Infrastructure: $ 5,4 Mn TConfC can be reduced by xxx % Maintaining of Conformity infrastructure: 0.5 Mn UNIDO Summary Findings from the Shrimps Case

17. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N SAARC BACKGROUND Significant economic growth in the Region –China, India, Bangladesh 6% to 8% per anum –Opportunity for mutually beneficial regional trade January 2002 SAARC summit declaration –Draft SAARC free trade treaty by end 2002 Recent Bi-lateral trade agreements –India with Nepal and Sri Lanka Standards /testing related problems in Trade –Example Nepal-India Free trade agreement

18. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N India –Nepal- Bi lateral trade treaty Signed 1996 -Automatic extension Benefits –Nepali exports to India grew 40% yoy in 1999/2000 –Nepal balancing 50% of imports from India through exports –Nepali exports to India declined 15% yoy 2000/2001 India sought New Negotiations Rules of Origin questioned Nepal accused of importing from Thailand/Korea & re-exporting India insisting on minimum local value addition Nepal Accusing India Imposing SPS (Plant Quarantine laws) India requiring compliance to Indian standards Indian State Government imposing taxes New agreement 6 th March 2002 for 5 years with 4 new clauses –Minimum 25 % value addition –Tariff rate quotas imposed for (acrylic yarn, copper products, zinc oxide, vegetable fat) –Demonstrate product origin (“acceptable certificate of origin) –In case of “unusual surge in imports” India can take remedial measures

19. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N ISSUES TO BE ADDRESSED ACCREDITATION –Beneficial to rely on regional capacities ? –Could NABL be the accreditor for the region? –Politically acceptable? –Should there be a SAARC accreditation Board? –Sponsorship SAARC-UNIDO-PTB-EU CALIBRATION - Traceability –Could NPL India be used (support from Pakistan, SRL) – Politically acceptable? – SAARC Calibration Service? SARC/PTB/ UNIDO IMMEDIATE ACTION POSSIBLE –India NPL, Pakistan NPSL launch inter-comparison scheme –India NABL – Launch inter laboratory testing scheme

20. Challenges in Conformity Assessment for developing countries, December 2004 U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N CONCLUSIONS Tremendous SAFTA Trade Potential Harmonisation of standards- lessons from EU Lessons from Bi-lateral agreements –Nepal- India, Sri Lanka- India Need for Recognised Testing & Conformity –Recognised Calibration NPL India, NPSL Pakistan, ITI Sri Lanka –Recognised Accreditation India NABL Sri Lanka accredited (SWEDAC path) Pakistan PNAC

21. U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N THANK YOU Ouseph Padickakudi, Programme Manager, UNIDO E-mail: O.Padickakudi@unido.org Web: www.unido.org